Deck 1: Globalization and the Multinational Firm

Question 1

Country A can produce 10 yards of textiles and 6 pounds of food per unit of input.Compute the opportunity cost of producing food instead of textiles.

A) 1 yard of textiles per 1.67 pounds of food
B) 1 pound of food per 1.67 yards of textiles
C) 1 yard of textiles per 0.6 pounds of food
D) 1 pound of food per 0.6 yards of textiles

Answer 1

C
Explanation: 1 yard of textiles = 6/10 = 0.6 pounds of food

Question 2

Privatization refers to process of:

A) Having government operate businesses for the betterment of the public sector
B) Government allowing the operation of privately owned business
C) Prohibiting government operated enterprises
D) A country divesting itself of the ownership and operation of a business venture by turning it over to the free market system

Answer 2

D

Question 3

What major dimension sets apart international finance from domestic finance?

A) Lower Foreign exchange and political risks
B) Market perfections
C) Depleted opportunity set
D) Higher Foreign exchange and political risks

Answer 3

D

Question 4

An example of a political risk is

A) Expropriation of assets
B) Adverse change in tax rules
C) The opposition party being elected
D) Expropriation of assets and Adverse change in tax rules

Question 5

David Ricardo's theory of comparative advantage has the following policy implication:

A) Liberalization of international trade will enhance the welfare of the world's citizens
B) International trade is a zero-sum game
C) One country will benefit from trade at the expense of another country
D) Restriction of international trade will enhance the welfare of the world's citizens

Question 6

Country B can produce 10 yards of textiles and 6 pounds of food per unit of input.Country A can produce 8 yards of textiles and 5 pounds of food per unit of input.

A) Country A is relatively more efficient than Country B in the production of textiles
B) Country B is relatively more efficient than Country A in the production of food
C) Country A has an absolute advantage over Country B in the production of food and textiles
D) Country B has an absolute advantage over Country A in the production of food and textiles.

Question 7

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input.Country B can produce 8 yards of textiles or 5 pounds of food per unit of input.

A) Country A is relatively more efficient than Country B in the production of food
B) Country B is relatively more efficient than Country A in the production of textiles
C) Country A has an absolute advantage over Country B in the production of food and textiles
D) Country B has an absolute advantage over Country A in the production of food and textiles

Question 8

The theory of comparative advantage:

A) Claims that economic well-being is enhanced if each country's citizens produce only a single product
B) Claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries
C) Claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries, and then trade production
D) Claims that no country has an absolute advantage over another country in the production of any good or service

Question 9

Exchange rate risk refers to

A) An expected drop in an exchange rate.
B) A highly stable exchange rate.
C) Lower profit due to an expected drop in an exchange rate.
D) Lower profits due to an unexpected change in exchange rates.

Question 10

Market imperfections include all of the following except:

A) Taxes on imported goods
B) Taxes on exported goods
C) Stock markets
D) Two different classes of shareholders for one company

Question 11

GATT,the General Agreement on Tariffs and Trade,has been successful in:

A) reducing import tariffs worldwide by an average of 98%.
B) reducing import tariffs worldwide by an average of 78%.
C) reducing import tariffs worldwide by an average of 58%.
D) reducing import tariffs worldwide by an average of 38%.

Question 12

A multinational firm can be defined as:

A) A firm that invests short-term cash inflows in more than one currency
B) A firm that has sales affiliates in several countries
C) A firm that is incorporated in more than one country
D) A firm that incorporated in one country that has production and sales operations in several other countries

Question 13

The goal of shareholder wealth maximization

A) is not appropriate for non-U.S. business firms.
B) means that all business decisions and investments that a firm makes are done for the purpose of making the owners of the firm better off financially.
C) is a sub-objective the firm should attempt to achieve after the objective of customer satisfaction is met.
D) is in conflict with the privatization process taking place in third-world countries.

Question 14

The common monetary policy for the euro zone is now formulated by

A) the Bundesbank in Germany.
B) the Federal Reserve Bank.
C) the World Bank.
D) the European Central Bank.

Question 15

The euro

A) is the common currency of Europe.
B) is backed by gold.
C) is an electronic currency with no physical bills.
D) is the currency of Britain.

Question 16

Multinational firms gain from their global presence in the following ways except:

A) Rising marginal costs of production
B) Economies of Scale
C) Low-cost labour in foreign countries
D) Spreading R&D expenditures over global sales

Question 17

The "Big Bang" refers to:

A) Deregulation of the Japanese stock market
B) Deregulation of the German stock market
C) Deregulation of the British stock market
D) Deregulation of the Mexican stock market

Question 18

Recent trends in the globalization of the world economy include all of the following except:

A) Emergence of global financial markets
B) Economic differentiation
C) Advent of the euro
D) Privatization

Question 19

The euro zone has

A) a common fiscal policy.
B) a common monetary policy.
C) a common taxation policy.
D) a common immigration policy.

Question 20

Political risk includes all of the following except:

A) Expropriation
B) Unexpected changes in tax rules
C) Change in government
D) Unexpected changes in environmental rules

Question 21

What are some of major recent trends in globalization?

Question 22

If the price of potatoes is $300 per ton,with free trade the price of tomatoes can be any of the numbers below EXCEPT

A) $600
B) $750
C) $900
D) All of these numbers can be the equilibrium price of tomatoes

Question 23

If people in both countries eat the same dish that requires 0.1 kg of tomatoes and 1.4 kg of potatoes to prepare,how much potatoes will be produced in the Republic of Belarus?

A) None
B) 333.33 tons
C) 500 tons
D) 666.67 tons

Question 24

If people in both countries eat the same dish that requires 0.1 kg or tomatoes and 1.4 kg of potatoes to prepare,how much tomatoes are CONSUMED in Republic of Belarus?

A) Less than 100 tons
B) At least 100 tons but less than 200 tons
C) At least 200 tons but less than 400 tons
D) More than 400 tons

Question 25

What is Political risk?

Question 26

What is the goal of sound financial management?

Question 27

Which country has absolute advantage in producing potatoes?

A) Russia
B) Republic of Belarus
C) Both countries
D) Neither country

Question 28

If the total world production of potatoes is 2000 tons,how much tomatoes will be produced in Russia?

A) 1000 tons
B) 500 tons
C) 666.67 tons
D) 333.33 tons

Question 29

If people in both countries eat the same dish that requires 0.1 kg or tomatoes and 1.4 kg of potatoes to prepare,and the price of potatoes is $1000 per ton,what is the GDP in Republic of Belarus?

A) $165,000
B) $333,333
C) $1,000,000
D) None of these

Question 30

Which country has comparative advantage in producing potatoes?

A) Russia
B) Republic of Belarus
C) Both countries
D) Neither country

Question 31

What is the specific Canadian perspective on international finance?

Question 32

What is special about international finance?