Deck 1: Introduction

Question 1

International ________ can reduce the volatility of an investment portfolio because national financial markets tend to move independently of each other.

A)arbitrage
B)centralization of the MNC's cash
C)diversification
D)investment

Answer 1

C

Question 2

The defenders of multinationals believe that __________ are the appropriate reward for efficiently providing the global economy with products and services.

A)profits
B)subsidies
C)tax holidays
D)low-interest,government-subsidized loans

Answer 2

A

Question 3

primary objective of the multinational corporation is to a. )maximize shareholder wealth
B)maximize world production
C)minimize debt
D)minimize the cost of doing business globally

Answer 3

A

Question 4

Which of the following is an example of reverse foreign investment?

A)Honda builds a factory in Ohio
B)Apple builds a plant in Ireland that exports to the United States
C)British Telecom issues new stock in the United States
D)American investors buy shares in Sony

Question 5

___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.

A)Cost minimizers
B)Market seekers
C)Raw-material seekers
D)High tech firms

Question 6

____________ is defined as the purchase of assets or commodities on one market for immediate resale on another in order to profit form a price discrepancy.

A)internationalization
B)arbitrage
C)financing
D)total risk

Question 7

Referring to the text,into which category of multinational is IBM most likely to fall?

A)raw materials seeker
B)market seeker
C)cost minimizer
D)hedge fund

Question 8

Companies gradually increase their commitment to international business with strategies that are progressively more sophisticated.Which one of the following steps is NOT one of the steps?

A)exporting
B)setting up a sales subsidiary
C)setting up a distribution system
D)creating a legal entity in the new target country

Question 9

The multinational financial system does NOT enable companies to

A)avoid currency controls
B)reduce taxes
C)access lower cost financing sources
D)avoid exchange rate risk

Question 10

Which of the following is NOT a failing of the theory of comparative advantage?
A.it ignores the role of uncertainty and economies of scale
B.it assumes that factors of production are immobile
C.it assumes that there are no differentiated products
D.it assumes a scarcity of resources

Question 11

___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.

A)cost minimizers
B)market seekers
C)raw-material seekers
D)whaling companies

Question 12

Which one of the following is an alternate and/or a precursor to setting up a production facility abroad?

A)exporting
B)setting up a sales subsidiary
C)setting up a distribution system
D)licensing

Question 13

value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates.

A)minimized
B)neutralized
C)enhanced
D)arbitraged away

Question 14

a firm operates globally it offers advantages such as

A)greater political power at home
B)bless taxes on its profits
C)greater negotiating power with foreign minority groups
D)greater negotiating power with labor unions

Question 15

___________ were the earliest multinationals.

A)raw-material seekers
B)market seekers
C)cost minimizers
D)oil companies

Question 16

Historically,the primary motive for U.S.multinationals to produce abroad has been to

A)lower costs
B)respond more quickly to the marketplace
C)avoid trade barriers
D)gain tax benefits

Question 17

Which of the following did NOT accelerate the growth of the global economy in the past twenty years?

A)the U.S.-Canada-Mexico free-trade pact
B)the creation of the European Union
C)China's entrance into the WTO
D)the first Iraq War

Question 18

prime transmitter of global competitive forces is the

A)public utility firm
B)financial management experience of the U.S.markets
C)the multinational corporation
D)the Federal Reserve System of the U.S.

Question 19

Given the added risks associated with doing business abroad,companies should

A)limit their foreign sales to less than 40% of total sales
B)limit their foreign assets to less than 30% of total assets
C)avoid foreign markets altogether unless they can earn a return in excess of the return they earn in their domestic market
D)not limit their foreign sales at all

Question 20

Which one of the following is a consequence of increased global competition?

A)the creation of new steel plants in the old industrial countries
B)the end of free-trade agreements between governments of the world
C)increased comfort level of trade unions with the consequences
D)increased anxiety among workers in the old industrial countries

Question 21

What would be the preferred mode of market penetration for the firm seeking to expand globally when the company wants to market its patent?

A)Licensing
B)Exporting
C)Setting up local facilities
D)Setting up a foreign sales office

Question 22

The internationalization process tends to

A)proceed in a preprogrammed series of steps
B)begin by licensing foreign producers
C)inevitably involve foreign production
D)often begin by accident

Question 23

Which of the following theories identifies specialization as the main reason for international business activity?

A)product life cycle theory of international trade
B)theory of diversification
C)doctrine of comparative advantage
D)theory of globalization

Question 24

For the multinational corporation,which one of the following complements to the integration of world wide operations is MOST critical?

A)flexibility
B)adaptability
C)speed
D)economies of scale of distribution

Question 25

According to Shapiro,if you were the CEO of a multinational corporation,which of the following would be MOST important to you in hiring a manager? One that

A)Avoids risk at any price
B)Manages effectively the political environment of the subsidiary country
C)Anticipates every future disturbance related to the supply chain
D)Makes decisions that anticipates problems and provides solutions that enhances the firm's prospects for growth

Question 26

According to the capital asset pricing model

A)only the systematic component of risk affects the required return
B)foreign investments whose returns are uncorrelated with the market's return should have a higher required return than comparable domestic investments
C)total risk of the investment is most relevant for small to medium-sized firms
D)diversification is secondary to risk levels of the investment

Question 27

Critics of the multinational corporation would not fault its tendency to

A)shift production from one location to another in search of lower costs
B)avoid taxes
C)cause balance of payments difficulties
D)engage in environmental protection measures

Question 28

According to the efficient market hypothesis,which one of the following is NOT correct?

A)markets place a premium on the future
B)today's stock price is the best predictor of tomorrow's stock price
C)stock prices reflect all available information
D)today's stock price incorporates the past history of prices

Question 29

Multinational firms

A)are riskier than purely domestic firms because of the exposures of operating abroad
B)are less risky than purely domestic firms because of international diversification
C)may be less risky than domestic firms if the added risks of operating overseas are more than offset by the ability to operate in nations whose economic cycles are not perfectly in phase
D)invest in developed countries only and avoid developing economies

Question 30

Although a firm may be interested in expanding overseas,it may not have the option to acquire a local operation.This type of challenge is most common in

A)the European Union
B)the United States
C)Japan
D)developing countries

Question 31

Which of the following is generally a licensing rather that an exporting opportunity for a multinational looking to expand globally?

A)The firm has a product that can be shipped without adaptation.
B)The firm is seeking to market a specific product or process technology that can be written down and transmitted objectively.
C)The firm has a product such as a new device that is technologically advanced.
D)A firm that has a specialized cost-saving equipment.

Question 32

Which one of the following provides strong evidence that internationalization continues to grow in the world economy?
A.import restrictions by the Bush Administration on foreign steel
B.efforts suggested by politicians to restrict the sourcing of foreign products by locally headquartered multinationals
C.the growing volume of foreign direct investment by U.S.as well as other multinational companies
D.pressure on governments to embargo unfriendly nations