mcqs by daniel

6 Chapter Quiz

This activity contains 28 questions.

Use the following Study Question to answer Question 1: STUDY QUESTION 1: Why is the understanding of international trade theory useful to managers in international business?

An understanding of trade theory helps managers understand _____.

customers' attitudes toward foreigners

where products may be produced more efficiently

the relative ease of transferring managers abroad

whether barter is preferable to cash transactions

Use the following Study Question to answer Question 2: STUDY QUESTION 3: Explain absolute advantage and the determinants of it.

Which of the following would be an example of a natural advantage rather than an acquired advantage for South Africa in world trade?

its multicultural and multi-ethnic society

its termination of racially mandated discrimination

its abundant wildlife

its fairly skilled labor force

Output will increase through specialization.

Factors of production will move to the countries offering them higher returns.Countries should exchange products with natural advantages for products with acquired advantages.Unemployment resulting from free trade will disappear as more people work in transporting goods longer distances.

http://wps.prenhall.com/bp_daniels_ib_11/44/11301/2893262.cw/hint/1/index.html



Use the following Study Question to answer Question 4: STUDY QUESTION 7: Explain the logic of the factor proportions theory and the complexities in applying it.

Assume that country A has a population density of 400 people per square mile and its neighbor, country B, has a density of 50 people per square mile. Which of the following would likely happen according to the factor proportions theory?

A will send capital intensive goods to B in exchange for natural resources.

A will send land intensive goods to B in exchange for labor intensive goods.A will send goods to B for which it has an acquired advantage in exchange for goods for which B has a natural advantage.A will send labor intensive goods to B in exchange for land intensive goods.

Use the following Study Question to answer Question 5: STUDY QUESTION 8: Why do most world trades occur among countries with similar characteristics?

Why do high income countries primarily trade with each other? High income countries have most of the world's natural resources.

High income countries have most of the world's population.

High income countries produce and consume more.

High income countries subsidize their agricultural production.

They can produce on a large scale.

Their capital intensive production methods save costs at this stage.

They have fewer environmental restrictions.

They have a near-monopoly position at this point.




Use the following Study Question to answer Question 7: STUDY QUESTION 11: What is a strategic trade policy and its limitations?

Which of the following is a possible limitation to the success of a strategic trade policy?

Governments find difficulty in identifying and targeting the right industries.

In time of national emergency, almost any industry may be considered strategic.While such policies are feasible for high income countries, low income countries lack sufficient entrepreneurs to implement the policies.Such policies are opposed by workers because they increase income inequality between managers and workers.

Use the following Study Question to answer Question 8: STUDY QUESTION 12: What are the four conditions in the Porter Diamond? What are the uses and limitations of the Porter Diamond?

A use of the Porter Diamond is to _____. add diamonds in addition to gold as part of nation's holdings of reserves

helps predict how the location of products' production will move from the original home country to other countries and then, if successful, back home againidentify and develop the right conditions to help countries become competitive for specific productsprotect against trademark infringement

the influx of approximately the same number of people from abroad

having more income per capita for their remaining population

receipt of remittances from the people working abroad

receipt of foreign aid to compensate for the loss




Use the following Study Question to answer Question 10: STUDY QUESTION 15: Explain the relationship between international trade and factor mobility from the standpoint of cost reduction.

From a global standpoint, the lowest production costs occur when _____.

trade is mobile internationally and factors of production are not

both trade and factor of production are mobile internationally

factors of production are mobile internationally and trade is not

neither factors of production nor trade are mobile internationally

Use the following Study Question to answer Question 11: STUDY QUESTION 2: What are mercantilism and neomercantilism and the arguments for against them?

Neomercantilism is a modern belief that countries should amass holdings of gold as reserves.

True

False

Use the following Study Question to answer Question 12: STUDY QUESTION 4: Explain comparative advantage and how it differs from absolute advantage.

Comparative advantage differs from absolute advantage in that it considers countries' acquired advantages in addition to their natural advantages as bases of trade.

True

False




Use the following Study Question to answer Question 13: STUDY QUESTION 5: What assumptions underlie the theories of specialization in international trade? What are the limitations of these assumptions?

The theories of specialization in international trade assume that countries have economic efficiency objectives.

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 6: Why are large countries usually less dependent on international trade than small countries are?

Large countries usually depend more on imports as a percentage of consumption and exports as a percentage of production than small countries.

True

False

Use the following Study Question to answer Question 15: STUDY QUESTION 8: Why does most world trade occur among countries with similar characteristics?

A reason that high income countries trade so much with each other is that their companies specialize by apportioning their reach efforts more to some sectors than to others.

True

False

True

False





Use the following Study Question to answer Question 17: STUDY QUESTION 10: What are the tests and limitations of the product life cycle (PLC) theory of trade and investment?

Products with extremely short product life cycles are more apt to adhere to the product life cycle theory of trade and investment than products with long life cycles.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 11: What is a strategic trade policy and its limitations?

A strategic trade policy holds that entrepreneurs, rather than government policy makers, should decide a country's future industrial emphasis.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 12: What are the four conditions in the Porter Diamond? What are the uses and limitations of the Porter Diamond?

The Porter Diamond is a theory holding that domestic conditions need to be favorable to develop globally competitive companies therein.

True

False




Use the following Study Question to answer Question 20: STUDY QUESTION 14: What are the effects of international factor mobility on origin and destination countries?

The foreign-born percentage of the population is significant (over 20 percent) in some countries but insignificant (less than 2 percent) in others.

True

False

What do mercantilism and neomercantilism have in common?

To create paragraphs in your essay response, type <p> at the beginning of the paragraph, and </p> at the end.





What is country-similarity theory?


Does the international PLC theory still seem valid?


What are the conditions listed as important for competitive superiority in the Porter diamond?

To create paragraphs in your essay response, type <p> at the beginning of the




paragraph, and </p> at the end.

Based on your experience, do you think the US or your region has absolute or comparative advantage? Take an inventory of the items in your house or apartment and determine their origin. What do you learn from this?


Some countries have supported import substitution policies, aiming at a kind of autarky feeling they would stimulate their economies if they produced everything themselves. Would your state be able to provide all your needs? Check how many staples your state brings in for your everyday needs.




Does your state have a policy to develop foreign exports for its firms? Check out your local government sites to see what actions and agencies they provide.



7 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: What is trade protectionism, and why is an understanding of it useful for managers?

Why is an understanding of trade protectionism useful for managers?

It helps for determining whether to collude with competitors.

Governmental measures may limit your ability to sell abroad.

It helps in determining the least cost production location.

Governmental corruption raises the cost of operating.

Use the following Study Question to answer Question 2: STUDY QUESTION 3: Explain the argument for using protectionism to reduce unemployment. Why might the protectionism not fully work as planned?

Assume a country imposes import restrictions to reduce its unemployment. Which of the following may prevent employment from increasing?

Imports will simply increase from another country, which is not affected by the restrictions.Experience shows that exporters usually lower their prices to maintain market share.Other industries may become uncompetitive because of having to use higher priced domestic inputs.Workers prefer to use unemployment benefits rather than go back to work.

the decrease in agricultural employment will have minimal effect on agricultural production, while increasing output in the manufacturing sectorhigh income countries will lower their import barriers more readily for manufactured than for agricultural productstechnological developments, such as in gene splicing, will cause developing countries to become non-competitive in agricultural productionmore industrial jobs will reverse the adverse effects of the brain drain




Use the following Study Question to answer Question 4: STUDY QUESTION 7: Explain why and how governments impose trade restrictions to improve their relative trade positions.

What is the economic rationale for the comparable access argument in world trade?

Consumers are better off if their countries' export and import the same category of products, such as both exporting and importing automobiles.By running a favorable balance of trade, a country hurts employees and consumers in a country with a trade deficit.Excess demand in one country raises world prices that adversely affect consumers in countries where demand is lower.Domestic producers may be disadvantaged in cost of production if their access to foreign markets is less than foreign producers' access to their market.

Use the following Study Question to answer Question 5: STUDY QUESTION 8: Why might governments enact export restrictions? What are the possible negative consequences of these restrictions?

A reason for export restrictions is to _____. lower prices in foreign markets

lower prices in domestic markets

promote added foreign production

promote more domestic production

Use the following Study Question to answer Question 6: STUDY QUESTION 9: Explain the price control objectives from import restrictions.

From the standpoint of trying to control price, why might a country impose import restrictions?

to raise prices within "unfriendly" countries

to lower prices for domestic consumers

to foster competition among supplying countries

to prevent dumping that puts domestic producers out of business




Use the following Study Question to answer Question 7: STUDY QUESTION 11: Define and explain the different types of tariffs (duties).

Which of the following is an example of an import tariff? Canada charges a 10 percent tax on shirts made in the United States.

The United States charges a 5 percent tax on Mexican made shirts passing through to Canada.Mexico charges a 5 percent tax on shirts leaving Mexico, whether destined to the United States or to Canada.The United States foregoes charging its customary 10 percent tax on foreign made shirts for shirts made in Canada because of the free trade agreement between the two countries.

Use the following Study Question to answer Question 8: STUDY QUESTION 12: Define and explain the non-tariff barriers that directly affect prices to limit trade.

Which of the following makes customs valuation difficult? There is disagreement on what is a subsidy.

When there are compound duties, ad valorem duties have to be adjusted downward.There may be difficulty in determining under which product classification the tariff should be assessed.It is sometimes hard to distinguish between foreign aid and foreign loans.

Use the following Study Question to answer Question 9: STUDY QUESTION 13: List and explain the nontariff barriers that limit the quantity of goods traded.

Administrative delays in moving goods internationally are considered trade barriers because _____.

they may cause goods to be cleared at night when customs passes on over-time charges to the tradersdonors of foreign aid insist on the aid being spent in their own countries

they create uncertainty and raise the cost of carrying inventory

many services are handled as national monopolies




Use the following Study Question to answer Question 10: STUDY QUESTION 15: When a company faces import competition that threatens its market position, what alternatives might it follow?

Assume a company wants to receive protection from import competition. Which of the following is a means to help it achieve this protection?

move into more profitable niches

ally with other companies in their industry

buy more components from foreign countries

divert more sales to export markets

Use the following Study Question to answer Question 11: STUDY QUESTION 2: What are the conflicting results of trade policies?

Consumers typically withhold the purchase of foreign made products that threaten the continued employment of domestic workers.

True

False

Use the following Study Question to answer Question 12: STUDY QUESTION 4: Explain the rationale for and problems of making the infant industry argument work as intended.

The infant industry argument for protectionism assumes that increased worker efficiency will compensate for poor economies of scale in production.

True

False




Use the following Study Question to answer Question 13: STUDY QUESTION 5: Why do developing countries sometimes impose import restrictions to increase their levels of industrialization? What problems might result from these restrictions?

Support for using import controls to spur industrialization in developing countries is partially based on the historical deterioration of the terms of trade for raw materials and agricultural products.

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 6: Compare import substitution policies with export-led development policies.

Recently, most developing countries have shifted interest in favor of import substitution as opposed to export-led development policies.

True

False

Use the following Study Question to answer Question 15: STUDY QUESTION 8: Why might governments enact export restrictions? What are the possible negative consequences of these restrictions?

Export restrictions to lower domestic prices may influence companies to lower domestic production.

True

False

Use the following Study Question to answer Question 16: STUDY QUESTION 9: Explain the price control objectives from





import restrictions.

The optimum-tariff theory holds that an import tariff causes foreign producers to lower their prices.

True

False

Use the following Study Question to answer Question 17: STUDY QUESTION 10: What are the noneconomic rationales for governmental intervention in the free movement of trade? What problems exist in using protectionism to achieve the noneconomic objectives?

Proponents of trade sanctions argue that they should be imposed on countries following unacceptable practices even if the sanctions don't cause those practices to change.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 11: Define and explain the different types of tariffs (duties).

The term effective tariff refers to a tariff that achieves its objective.

True

False

True

False




Use the following Study Question to answer Question 20: STUDY QUESTION 14: What are the main arguments for limiting trade in services?

Differences among countries in licensing standards for professions inhibit international trade in services.

True

False

According to your text, what are the main economic rationales for government intervention in trade?


According to your text, what are the main economic rationales for government intervention in trade?





What are the major instruments of trade control used by governments?





What advice is given to companies who are facing import competition?


Can you find examples of where government intervention by other countries hindered the import of US goods? Seek examples on the Internet under the search expressions 'boycott' or 'restrictions on US imports'.


Make a list of imports you think the US would try to restrict and check it through research.





Protection of infant industry has often been a rationale for government control. In your region, do you know of any infant industries that need possible government protection in order to survive?



8 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: What are three ways to approach economic integration? How do they differ?

A good example of regional economic integration is: the European Union.

the World Trade Organization.

a bilateral trade agreement involving countries from two different regions.

any trade group that involves no more than two countries from the same region.

Use the following Study Question to answer Question 2: STUDY QUESTION 3: Compare and contrast the WTO and its predecessor, GATT.

A major difference between the WTO and GATT is that: the WTO has a more effective enforcement mechanism than did GATT.

GATT only involved the industrial countries, whereas the WTO includes developing countries as well.the WTO is trying to eliminate non-tariff barriers, whereas GATT encouraged their use.GATT involves trade in goods, whereas the WTO involves trade in services.

the long distances between the countries made it more likely they would trade with each other.neighboring countries are more willing to coordinate their economic policies.their tastes and preferences are more similar to each other than they are to any other countries in the world.they tried to form a regional group with the European Union but were not allowed to join due to differences in legal systems.




Use the following Study Question to answer Question 4: STUDY QUESTION 5: What are the types of economic integration and the differences among these types?

A regional economic group that has the same external tariff levied on goods that are imported from non-member countries is an example of:

a free trade agreement.

a common area.

a foreign trade zone.

a customs union.

Use the following Study Question to answer Question 5: STUDY QUESTION 6: Explain the static effects of regional economic integration. Under what conditions may they develop?

An example of a static effect of regional economic integration is where:

an overall growth in the market results from expanding production and economies of scale.resources are shifted from inefficient to efficient companies as trade barriers fall.resources are shifted from efficient to inefficient companies due to rising tariffs.market size falls due to rising competition.

trade creation.

a customs union.

trade diversion.

economies of scale.




Use the following Study Question to answer Question 7: STUDY QUESTION 9: What is the euro and the rationale for it?

The euro is _________ . the common currency of the European Union

always stronger than the U.S. dollar since it represents more countries

is now the most widely traded currency in the world

a major barrier to trade inside of Europe since its value differs from country to country

Use the following Study Question to answer Question 8: STUDY QUESTION 12: What was the rationale for NAFTA?

The North American Free Trade Agreement: resulted in raising internal tariffs while lowering external tariffs.

is not a customs union at this point.

has a common currency modeled after the U.S. dollar.

is a good example of trade creation but not trade diversion.

Use the following Study Question to answer Question 9: STUDY QUESTION 14: How has NAFTA impacted trade and employment?

As a result of the NAFTA agreement, __________ trade and investment among the three member countries has dropped

due to political differences.the European Union has become a major partner of NAFTA, extending the benefit of NAFTA to the other side of the Atlantic.trade and investment among the three member countries has increased dramatically.illegal immigration between Mexico and the U.S. has almost disappeared.




Use the following Study Question to answer Question 10: STUDY QUESTION 16: What are two basic types of commodity agreements? How do they differ?

A producer's alliance (commodity agreement): is best illustrated by OPEC.

involves producing countries but not exporting countries.

involves exporting countries but not importing countries.

is not permitted by the U.N. to use quotas or buffer stock systems to control inventory.

Use the following Study Question to answer Question 11: STUDY QUESTION 1: What are three ways to approach economic integration? How do they differ?

The European Union is an example of bilateral integration.

True

False

Use the following Study Question to answer Question 12: STUDY QUESTION 2: Why are regional trade groups important for MNEs' strategies?

Due to tariff reduction policies, regional trading groups can influence where companies trade and invest.

True

False

True

False





Use the following Study Question to answer Question 14: STUDY QUESTION 4: Why is geographic proximity an important reason for economic integration?

Geographic proximity is not an important issue in establishing regional trading groups since air travel is so much faster than it used to be.

True

False

Use the following Study Question to answer Question 15: STUDY QUESTION 6: Explain the static effects of regional economic integration. Under what conditions may they develop?

The increase in market size that results from regional integration is an example of a dynamic effect of integration.

True

False

Use the following Study Question to answer Question 16: STUDY QUESTION 7: What is the difference between trade creation and trade diversion resulting from regional economic integration?

Trade creation occurs when countries reduce tariffs and production shifts from protected to more efficient industries, thus resulting in an increase in trade.

True

False

Use the following Study Question to answer Question 17:




STUDY QUESTION 8: What are the functions of the European Commission, European Council, European Parliament, and European Court of Justice?

The European Commission is the EU's major decision-making body and is composed of the different ministers of the member countries.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 12: What was the rationale for NAFTA?

NAFTA is an example of a customs union.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 13: What are the rules of origin and local content provisions of NAFTA?

Rules of origin in NAFTA require that goods have at least 20 regional content in order to be eligible for the tariff-reduction provisions of NAFTA.

True

False

Use the following Study Question to answer Question 20: STUDY QUESTION 14: How has NAFTA impacted trade and employment?

Trade and investment in NAFTA have increased dramatically since the agreement was signed.

True

False





What have been the objectives of the GAAT and WTO since WWII?


What have been the major differences between the GATT and WTO?


What are the major characteristics of the regional economic integration that has taken place?





According to your text, what are the implications of the EU for corporate strategy?


What are the implications of NAFTA for corporate strategy?




You are studying international business and are increasingly aware of the regional trade integration organizations. How many of your classmates are? Take a poll and see how many of them are aware of one for each area of the world. Then see if they have an idea of what countries are members.


Farm subsidies have been a thorny subject of discussion for the GAAT and WTO for decades. See if your region has a position on these by researching on the Internet. Is your region or state a major agricultural supplier? What are its major farm products? Does it have a lobbying organization? What are the opinions they have expressed on subsidies either granted to local producers or to producers in other parts of the world?




You probably have classmates from different areas of the world. Interview them on the subject of subsidies and tariff barriers to get an 'outsider's' opinion.



9 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: What are foreign exchange and the exchange rate?

If you are traveling abroad and want to exchange one currency into another, what do you call the price of the currency?

The exchange rate.

The currency tariff.

The arbitrage rate.

The free market rate.

Use the following Study Question to answer Question 2: STUDY QUESTION 2: Explain the differences among spot transactions, forward transactions, and futures contracts.

If you expect to receive payment from a foreign buyer in a foreign currency in 90 days, which foreign exchange market do



you enter into now to make sure you can convert the future foreign currency amounts into your currency at a fixed exchange rate?

the spot market

the forward market

the future spot market

the spot forward market

Use the following Study Question to answer Question 3: STUDY QUESTION 3: For what reasons are U.S. dollars so widely traded?

The major currency in the world that is considered an intervention currency employed by monetary authorities in market operations to influence their own exchange rates is the ________________.

Special Drawing Right

Chinese yuan

market basket consisting of the euro and the British pound

U.S. dollar

Use the following Study Question to answer Question 4: STUDY QUESTION 4: What are the four biggest markets (locations) for foreign exchange trades?

The biggest market in foreign exchange is found in which of the following cities.

Shanghai, China

Frankfurt, Germany

London, England

New York City, USA

Use the following Study Question to answer Question 5: STUDY QUESTION 5: Define a foreign exchange bid, offer, and




spread.

In foreign exchange transactions, the bid rate is: the rate at which the trader buys foreign exchange.

the rate at which the buyer buys foreign exchange.

the difference between the rate at which the foreign exchange trader buys and sells foreign currency.typically higher for exotic currencies.

Use the following Study Question to answer Question 6: STUDY QUESTION 6: What is meant by a discount or premium between the spot and forward exchange rates?

The British pound/U.S. dollar exchange rate is $1.7205 in the spot market and $1.7223 six months forward. In this case, British pounds are trading ________

at a discount in the forward market.

at a premium in the forward market.

at a discount in the spot market.

at a negative spread.

Use the following Study Question to answer Question 7: STUDY QUESTION 7: What is a foreign exchange option?

Assume that you expect to receive a dividend in foreign currency in 30 days. In order to protect yourself against a possible foreign exchange loss, you enter into a contract with a foreign exchange trader to sell foreign exchange for your currency, and you retain the right but not the obligation to trade the currency. This type of contract is known as a(n) _________

option.

futures contract.

forward contract.

spread contract.



Use the following Study Question to answer Question 8: STUDY QUESTION 8: What is the difference between hard and soft currencies?

A currency that is not always freely convertible into other currencies is known as a ____________ .

hard currency

forward currency

soft currency

Asian currency

Use the following Study Question to answer Question 9: STUDY QUESTION 9: What is a multiple exchange rate system?

The government typically determines different exchange rates to attach to specific transactions in which exchange rate system?

A free-floating system.

A multiple exchange rate system.

A spot/forward system.

A hard but not soft currency system.

Use the following Study Question to answer Question 10: STUDY QUESTION 12: What institutions do companies use for exchange currencies?

Most foreign exchange trades take place in which market? Asia

the OTC market

the futures market

the options market

Use the following Study Question to answer Question 11: STUDY QUESTION 1: What are foreign exchange and the exchange rate?





The exchange rate is the number of units of one currency to buy a unit of another currency.

True

False

Use the following Study Question to answer Question 12: STUDY QUESTION 2: Explain the differences between spot transactions, forward transactions, and futures contracts.

A futures contract is between a client and its bank for future delivery of currency.

True

False

Use the following Study Question to answer Question 13: STUDY QUESTION 3: For what reasons are U.S. dollars so widely traded?

Since the euro has combined all of the currencies in Europe together into one currency, it is now the most widely traded currency in the world.

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 4: What are the four biggest markets for foreign exchange trades?

Since the U.S. has the largest economy in the world and its currency is the most widely traded currency in the world, New York is the largest market for foreign exchange.

True

False




Use the following Study Question to answer Question 15: STUDY QUESTION 5: Define a foreign exchange bid, offer, and spread.

The difference between the bid and offer rate in foreign exchange is known as the spread.

True

False

Use the following Study Question to answer Question 16: STUDY QUESTION 6: What is meant by a discount or premium between the spot and forward exchange rates?

If a foreign currency is expected to strengthen in the future against another currency, it is selling at a discount in the forward market.

True

False

Use the following Study Question to answer Question 17: STUDY QUESTION 7: What is a foreign exchange option?

A foreign exchange option is the right but not the obligation to trade currency in the future.

True

False

True

False





Use the following Study Question to answer Question 19: STUDY QUESTION 9: What is meant by a multiple exchange rate system?

In a multiple exchange rate system, market forces assign different exchange rates to different types of transactions.

True

False

Use the following Study Question to answer Question 20: STUDY QUESTION 12: What institutions do companies use for exchanging currencies?

Commercial banks are the only financial institutions that deal in foreign exchange.

True

False

What are the two major segments of the foreign exchange market and what are their differences?





What are the major foreign-exchange instruments?


What is the difference between a forward contract and a future?


What are the major ways firms use foreign exchange?





What are the different kinds of bonds used on the international bond market?





Have you ever engaged in a forward contract yourself? Try to imagine something you did that resembles a forward contract.


You may not always know the nature of bonds you buy. Have you or anyone in your family or among your friends bought bonds? Ask around and see if they know the origin of the bond. Is it a Eurobond or global bond? Do you have any holdings in a mutual fund? Do they hold international bonds? Check the list of investments they hold and which you have bought a share in.




10 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: What is the International Monetary Fund (IMF)? What are its objectives?

The major role of the International Monetary Fund is to ____________ .

help reduce tariffs worldwide

provide funding for infrastructure development projects

ensure that all exchange rates are rising in value

promote exchange rate stability

Use the following Study Question to answer Question 2: STUDY QUESTION 3: List and define the categories of exchange rate regimes.

A pegged exchange rate is one that: is locked onto the value of another currency.

changes in value due to market forces.

the IMF manages for a country.

is not permitted in world trade.

Use the following Study Question to answer Question 3: STUDY QUESTION 4: What is a black market?

A foreign exchange market where people are willing to pay more




for hard currency than at the official exchange rate is known as __________

a semi-official market.

a black market.

a managed float market.

a pegged market.

Use the following Study Question to answer Question 4: STUDY QUESTION 5: What is the role of central banks? How do they carry out this role?

If the European Central Bank decides to sell euros for U.S. dollars, it is trying to __________

raise the value of the euro.

weaken the value of the dollar.

change the euro to a freely floating currency.

weaken the value of the euro.

Use the following Study Question to answer Question 5: STUDY QUESTION 7: How does a floating exchange rate system work?

Currencies that respond to supply and demand conditions free from government intervention are known as __________ .

freely floating currencies

managed exchange rate systems

pegged exchange rate systems

weak currencies

Use the following Study Question to answer Question 6: STUDY QUESTION 8: How does a government maintain a currency value in a managed fixed rate system?




In what type of foreign exchange system does the government determine the price of the currency?

a freely floating system

a managed fixed rate system

a Central Bank system

a purchasing power parity system

Use the following Study Question to answer Question 7: STUDY QUESTION 9: Explain the adjustment system that enables a pegged currency system to work.

In a pegged exchange rate system, lowering the value of a currency is known as __________ .

devaluation

revaluation

purchasing power parity

free floating

Use the following Study Question to answer Question 8: STUDY QUESTION 10: Explain how inflation affects currency values according to the purchasing power parity (PPP) theory.

According to purchasing power parity theory, if British inflation were 5 percent and U.S. inflation were 3 percent, the dollar would be expected to _______ against the British pound.

rise

fall

stabilize

reverse

Use the following Study Question to answer Question 9: STUDY QUESTION 13: What is the difference between fundamental forecasting and technical forecasting of exchange rates?




Which type of forecasting uses past trends in exchange rates to predict future exchange rates?

Fundamental forecasting

Technical forecasting

Issues-based forecasting

Qualitative forecasting

Use the following Study Question to answer Question 10: STUDY QUESTION 16: Why do we need to bother with predicting exchange rate changes?

How is the marketing function affected by exchange rate changes?

Changes in exchange rates must get passed on to the consumer.

Exchange rate movements usually result in foreign exchange gains that allow exporters to drop prices.If the currency of an exporter drops in value, it allows the exporter lower export prices or keeps the price the same and increases profit margins.Exchange rate changes are always negative to exporters when the currency falls in value and positive when the currency rises in value.

Use the following Study Question to answer Question 11: STUDY QUESTION 1: What is the International Monetary Fund (IMF)? What are its objectives?

The major objective of the International Monetary Fund is to reduce tariffs so that countries trade more.

True

False

True

False




Use the following Study Question to answer Question 13: STUDY QUESTION 4: What is a black market?

A black market in foreign currency arises because a currency is stronger than it should be.

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 5: What is the role of central banks? How do they carry out this role?

Although the Federal Reserve Bank in the U.S. is responsible for overseeing policies concerning the U.S. dollar, it is not allowed to intervene in markets.

True

False

Use the following Study Question to answer Question 15: STUDY QUESTION 6: In what forms do central banks hold their assets?

Central banks are allowed to hold currencies and SDRs as reserve assets.

True

False

Use the following Study Question to answer Question 16: STUDY QUESTION 7: How does a floating exchange rate system work?





Since the U.S. dollar is pegged to the euro, it does not have a floating exchange rate regime.

True

False

Use the following Study Question to answer Question 17: STUDY QUESTION 8: How does a government maintain a currency value in a managed fixed rate system?

In a managed fixed exchange rate system, the government closely monitors currency values but lets market forces determine the value of the currency.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 10: Explain how inflation affects currency values according to the purchasing power parity (PPP) theory.

According to purchasing power parity theory, the relative difference in inflation should cause a change in exchange rates.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 11: What is the Big Mac index, and what are its limitations?

According to the Big Mac index, actual exchange rates should mirror the price difference of a Big Mac between two different countries.

True

False




Use the following Study Question to answer Question 20: STUDY QUESTION 12: What is the relationship between the Fisher Effect and the International Fisher Effect in terms of currency values?

According to the International Fisher Effect, changes in exchange rates should affect changes in interest rates.

True

False

What is meant by dollarization?


What are the roles played by the IMF?





What are SDRs?


What is the major purpose of the Euro?




How do managers forecast exchange-rate movements?


What is the current value of the SDR? How do you find it?


How often do you pay attention to exchange rates? Is it often covered on the news? Why?






If you have worked for or know people who work for a business with international involvement, ask them if exchange rates are important to their activity and how.



11 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 5: How does a firm create value in terms of differentiation?

A strategy that focuses on increasing the actual or perceived attractiveness of a product is referred to as a: ______________ .

differentiation strategy

optimization strategy

low cost leadership strategy

efficiency strategy

Use the following Study Question to answer Question 2: STUDY QUESTION 6: What is the value chain?

Value chain activities can be categorized as: primary activities and support activities.

primary activities and secondary activities.

input activities and throughput activities.

profitable activities and unprofitable activities.


In the context of value chain analysis, the support activities: provide inputs that allow the primary activities to take place.

include the organizational structure, coordination systems, and culture of the firm.include the design, creation, and delivery of the product.

involve R&D, human resources, information systems, and the firm infrastructure.




Use the following Study Question to answer Question 4: STUDY QUESTION 7: What does the idea of core competencies refer to? Why should managers pay attention to it?

The term __________ refers to the skills within the firm that competitors cannot easily match or imitate.

indigenous properties

discriminate abilities

special attributes

core competencies

Use the following Study Question to answer Question 5: STUDY QUESTION 8: What conditions influence how MNEs configure and coordinate their value chains?

Research of cost behavior in many industries indicates that a company can often cut its costs by 20 to 30 percent each time its cumulative output doubles. This is a phenomenon known as _____.

value creation

the experience curve

competitive advantage

economies of scope


In theory, a firm that aims to achieve location economies does so by:

dispersing each of its value creation activities to its optimal location.

basing all its value creation activities at the single best location.

concentrating primary activities in one country and support activities in another.consolidating activities given the nature of market demand.




Use the following Study Question to answer Question 7: STUDY QUESTION 13: What is a multidomestic strategy? What are its defining characteristics? Why would managers choose this type?

A primary reason for adopting a _____ strategy is that in some cases, cultural, legal-political, and economic conditions may dictate different practices from one country to another.

global

low-cost leadership

multidomestic

scientific


Firms pursuing a _____ strategy orient themselves toward achieving maximum local responsiveness.

transnational

multidomestic

global

international

Use the following Study Question to answer Question 9:STUDY QUESTION 15: What is a transnational strategy? What are its defining characteristics? Why would managers choose this type?

Transnational companies ________________ . require effective communication and coordination networks among their

different units worldwidemostly realize pressures for local responsiveness

centralize production facilities in one location worldwide

must effectively concentrate core competencies in select subsidiaries




Use the following Study Question to answer Question 10: STUDY QUESTION 15: What is a transnational strategy? What are its defining characteristics? Why would managers choose this type?

When new knowledge and capabilities are developed in both the domestic and foreign locations, both independently and jointly, and then purposefully transferred throughout the worldwide organization, the company is following a so-called _____.

multidomestic strategy

transnational strategy

global strategy

matrix strategy

Use the following Study Question to answer Question 11: STUDY QUESTION 3: What is Industry Structure? How can managers interpret it?

Increasing globalization of an industry tends to increase rivalry among industry members.

True

False

Use the following Study Question to answer Question 12: STUDY Question 4: How does a firm create value in terms of low-cost leadership?

A low-cost leadership strategy is a mixture of multidomestic and global strategies whereby the company attempts to capture the advantages of both.

True

False




Use the following Study Question to answer Question 13: STUDY QUESTION 5: How does a firm create value in terms of differentiation?

The essence of a differentiation strategy is to find unique ways to appeal to a wide range of buyers.

True

False


Support activities in the value chain have to do with the design, creation, and delivery of the product, its marketing, and its support and after-sale service.

True

False


The economies that arise from performing a value creation activity in the optimal location for that particular activity are called geographic economies.

True

False

True

False






In a multidomestic company, managers in the company's home country essentially develop competencies and make decisions to diffuse them globally.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 14: What is a global strategy? What are its defining characteristics? Why would managers choose this type?

A global strategy is one in which the company allows each of its foreign country operations to act fairly independent.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 14: What is a global strategy? What are its defining characteristics? Why would managers choose this type?

Employing a global strategy involves competing in essentially the same basic manner in all countries where the firm does business.

True

False

Use the following Study Question to answer Question 20:




STUDY QUESTION 15: What is a transnational strategy? What are its defining characteristics? Why would managers choose this type?

The transnational strategy is ideal for companies that gain a great deal from global integration and need a great deal of adaptation to local markets.

True

False

What is meant by industry structure and what are its contributing factors?






What are the components making up the firm's value chain?


What are some of the major challenges MNEs face in managing their international operations?


What is meant by global integration versus local responsiveness in international strategy?





Have you had a corporate strategy course before this course in international business? Do you understand in detail what factors come into play in Porter's Five Forces model? Write them down on a sheet of paper and then check other sources to see if you understand them well.


Do you or have you worked for a company that has major changes in its value chain that you observed or were involved in?




Make a list with two columns. In column one, write the products you often buy that seem to need local responsiveness, and in column two, the products that seem to need more global integration responsiveness. Does your list remind you of the examples in the grid in your book?



12 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: Why do international managers need to understand how to evaluate countries and select among them for operations? What are the major considerations in developing an overall location strategy?

Why is it useful for managers to understand how to evaluate countries for operations?

Companies must be choosy where they operate because they lack resources to operate everywhere.Some countries prohibit wholly owned operations.

The accuracy of information is better for some countries than for others.

Such evaluation is useful for deciding in what part of the value chain to operate.

Use the following Study Question to answer Question 2: STUDY QUESTION 3: What are the major indicators/variables that are important in comparing countries for market potential?



When comparing countries for market potential, one can generally say that _____.

per capita income is the best indicator to use

population size is the best indicator to use

labor costs are important indicators of market size

companies must consider variables other than income and population when estimating potential demand

Use the following Study Question to answer Question 3: STUDY QUESTION 5: When using scanning techniques, what variables are important in indicating where to go to secure resources?

Comparison of labor costs is especially important when deciding where ______.

to market a product

there is apt to be high corruption

to locate production

to locate companies' headquarters

Use the following Study Question to answer Question 4: STUDY QUESTION 7: What is meant by the liability of foreignness, and how does it influence companies' international location decisions?

What is meant by the liability of foreignness? a country's external debt

the lower early survival rate of foreign companies in comparison with local companiesthe preference of consumers to buy locally made products

governmental requirements on FDI that are different from those placed on local companies

Use the following Study Question to answer Question 5: STUDY QUESTION 8: Compare the advantages of locating foreign operations to avoid where competitors have gone versus




locating where competitors are.

What is meant by first mover advantage? the higher early failure of foreign than of local companies

gaining advantages over competitors by capturing the best partners, locations, and suppliersthe move into crowded markets to prevent advantages of competitors

getting a free-ride by following successful competitors in to market

Use the following Study Question to answer Question 6: STUDY QUESTION 9: How might political risk occur? How can companies respond to it?

Government takeovers of companies have generally _____. occurred more frequently when countries have broken apart

resulted in total loss for the companies taken over

have affected local companies more than foreign investors

have usually been preceded by formal declarations of intent and legal processes to determine compensation

Use the following Study Question to answer Question 7: STUDY QUESTION 11: Compare the major types of published data/information managers can use to compare countries. What are the problems in relying on these data?

Which of the following is a reason for comparability differences in governmentally provided data from different countries?

difference in base year for data collection

difficulty of translating questions for respondents

cost differences for goods produced in the home

countries differences in accepted corruption

Use the following Study Question to answer Question 8: STUDY QUESTION 12: Explain how grids and matrices can be used as tools to compare countries.




A matrix to compare countries _____. assumes that data are collected from the same sources

gives a graphical comparison, such as on risk and opportunity

is used more for re-investment than for new investment decisions

assumes that each variable entered has the same weight

Use the following Study Question to answer Question 9: STUDY QUESTION 13: How should reinvestment and harvesting be treated in companies' location decisions?

When companies divest foreign facilities, they generally prefer to do so by _____.

trading that operation for other companies' operations in other countries

shutting down the operation

selling the operation

transferring fixed assets to another country

Use the following Study Question to answer Question 10: STUDY QUESTION 15: Why do most companies examine expansion proposals one at a time rather than comparing various expansion proposals?

When companies receive proposals from other companies to participate in projects, they generally _____.

make a decision on a go-no-go basis

must harvest another operation to enter this agreement

respond positively only if they are pursuing diversification strategies

consider this as an agglomeration tactic

Use the following Study Question to answer Question 11: STUDY QUESTION 2: When deciding where to locate production and sales efforts, how and why might companies use scanning techniques? How do these techniques differ from the making of final country selections?




Scanning allows companies to examine large groups of countries broadly in order to weed out the less potentially lucrative ones.

True

False

Use the following Study Question to answer Question 12: STUDY QUESTION 4: Explain why/how the ease and compatibility of operations is important in choosing where to operate.

Most managers prefer to go where they perceive it's easier to operate because these locations offer better returns.

True

False

Use the following Study Question to answer Question 13: STUDY QUESTION 5: When using scanning techniques, what variables are important in indicating where to go to secure resources?

By moving into countries because they offer labor cost-advantages, companies generally gain long-lived advantages.

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 6: Why is the existence of red tape and corruption important in choosing where to operate?

The existence of wide-spread corruption adds to companies' costs of doing business.

True

False




Use the following Study Question to answer Question 15: STUDY QUESTION 8: Compare the advantages of locating foreign operations to avoid where competitors have gone versus locating where competitors are.

Companies may sometimes gain advantages by locating near a cluster of competitors because these locations may attract more buyers.

True

False

Use the following Study Question to answer Question 16: STUDY QUESTION 10: What risks other than political risks should companies consider when making international location decisions?

The risks to companies from natural disasters are spread rather evenly around the globe.

True

False

Use the following Study Question to answer Question 17: STUDY QUESTION 11: Compare the major types of published data/information managers can use to compare countries. What are the problems in relying on these data?

Individualized reports are generally the most costly for companies seeking information about their possible foreign operations.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 12: Explain how grids and matrices can be





used as tools to compare countries.

When companies make their final decisions on where to operate, they generally do so by comparing where countries are located on the matrices they prepare.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 14: What is meant by diversification and concentration strategies for international location decisions? Under what circumstances would one strategy be preferable to the other?

In a concentration strategy, companies generally put most of their efforts into a single region of the world.

True

False

Use the following Study Question to answer Question 20: STUDY QUESTION 20: How might demographic and technical factors influence changes in the future prime locations for production and sales?

Demographers predict that the percentage of the world's population living in currently high-income countries will fall through the year 2050.

True

False

Why is the choice of the country in which the firm will operate so important for the firm?





What are the main opportunities the firm should look for in a target country?





How is a grid used to compare countries' attractiveness for investment?


What are the main criteria for firms' allocation resources among locations?


Your book mentions a variety of external sources of information that may be used to put together an assessment of opportunities and risks in a target country. Consult the list and see which of those sources you may have used in doing research




on countries beyond an encyclopedia. What did you find?


Your textbook mentions that firms often need to harvest or at least exit from some country operations. Do you know of any examples of firms that have closed down some part of their business in a foreign country? Look into firms' exiting countries. What are usually the reasons?


What countries do you consider particularly risky for doing business? Write down a list of 10 and check on the Internet to see if the specialists agree or if there are countries that never even occurred to you.





13 Chapter Quiz


Use the following Study Question to answer Question 1: STUDY QUESTION 1: How prevalent is exporting today?

Exports and imports play _____ in the U.S. economy than they did 20 years ago.

a much greater role

a much lesser role

the same role

Use the following Study Question to answer Question 2: STUDY QUESTION 2: What are the strategic advantages of exports?



The advantages of using an export strategy to serve customers in foreign market include: ________________ .

minimizing risk and capital requirements

maximizing exposure to political risks

providing more control than licensing and franchising

is more cost effective than a foreign direct investment strategy


A disadvantage of exporting is that it ____________ . is quite risky

will always lead to the lowest possible production costs

is the most expensive method of expanding globally

is inconsistent with a global strategy


The advantages of using an export strategy to build a customer base in foreign markets include: ____________________ .

an effective means to avoid tariffs

minimizing risk and capital requirements

being more costly than licensing and franchising

providing the means to easily accommodate local buyer tastes


Exporting is _______________ .




a common entry strategy for international global expansion

an inevitable activity for all companies

operationally complex activity that often poses insurmountable challenges

expensive to manage

Use the following Study Question to answer Question 6: STUDY QUESTION 5: What are the pitfalls of exporting?

Common pitfalls to exporting include: _________________ . competent market analysis

thorough understanding of competitive conditions in foreign markets

the tendency to over-customize product foreign customers' needs

access to a cost effective distribution program

Use the following Study Question to answer Question 7: STUDY QUESTION 10: What are the types of third-party intermediaries that assist exporters?

One way for companies new to export to begin identifying the opportunities and challenges of international trade is to hire an: ______________ .

export study company

informational intermediary

export management company

export forwarder

export medical clearance

European Monetary Commission

export trading company

experienced multinational corporation




Use the following Study Question to answer Question 9: STUDY QUESTION 15: What sources of assistance are available to the exporter who is using direct selling strategy?

In the United States, the _____ is the most comprehensive source of public assistance and information about export advice.

Congressional Trade Liaison

Department of State

Central Trade Authority

Department of Commerce

Use the following Study Question to answer Question 10: STUDY QUESTION 13: What is countertrade and what is its implication to trade?

_____ is the direct exchange of goods and/or services between two parties without a cash transaction.

Counterpurchase

Offset

Barter

Counterexchange

Use the following Study Question to answer Question 11: STUDY QUESTION 1: How prevalent in exporting today?

In the United States, more than 90% of firms that export are small businesses.

True

False




Use the following Study Question to answer Question 12: STUDY QUESTION 1: How prevalent is exporting today?

The volume of export activity in the world, both in manufacturing and service sectors, is decreasing as international trade has become more difficult.

True

False

Use the following Study Question to answer Question 13: STUDY QUESTION 4: What the features of the stages of export development??

"Born global" firms are those that take their time entering international markets, typically building their domestic business as the primary goal of the firm .

True

False

Use the following Study Question to answer Question 14: STUDY QUESTION 8: What is the role of Customs Agencies?

The most comprehensive source of publicly available export related information for American companies is provided by custom agencies.

True

False

True

False






Export management companies are export specialists who act as the international finance department for their client firms.

True

False


A common assignment for an EMC is to set up and begin export operations for a firm with the understanding that the firm will take over operations after they are well established.

True

False

Use the following Study Question to answer Question 18: STUDY QUESTION 13: What is countertrade and what are its implication to trade?

Countertrade is an efficient means of structuring an international sale when conventional means of payment are inexpensive or prevalent.

True

False

Use the following Study Question to answer Question 19: STUDY QUESTION 14: What is barter, buyback, and offset trade?





Barter occurs when a firm builds a plant in a country - or supplies technology, equipment, training, or other services to the country - and agrees to take a certain percentage of the plant's output as partial payment for the contract.

True

False

Use the following Study Question to answer Question 20: STUDY QUESTION 14: What is barter, buyback, and offset trade?

A common problem for firms engaged in barter is the risk of having to accept goods they do not want, cannot use, or have difficulty reselling at a reasonable price.

True

False

According to your textbook, what is the difference between an investment bank like Goldman Sachs arranging financing for a foreign firm operating in China and the opening up of the branch of a hotel in a foreign country?


What are the advantages of exporting over FDI?




What are some of the strategic advantages of importing?


In exporting, what is the difference between direct selling and indirect selling?





What are the kinds of countertrade?





In your daily life, do you think you are more affected by imports or exports?


Do you see a major difference between direct and indirect selling within the local market of your area or the US and direct and indirect selling as described in your textbook chapter on exporting? Make a short list of firms that sell directly and indirectly.




mcqs by daniel

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