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

Accepted Answer

Diversification refers to investing in a variety of assets to spread risk and reduce exposure to any one particular asset. When investing internationally, diversification can reduce portfolio volatility because different countries and regions have different economic and market conditions, which means their financial markets move independently of each other. As a result, events in one country or region are less likely to have a significant impact on the overall portfolio.

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

Accepted Answer

Multinationals are profit-oriented companies that seek to maximize their financial returns. The defenders of multinationals argue that profits are the appropriate reward for efficiently providing the global economy with products and services. Profit is a strong indicator of efficient resource allocation and effective management, and it helps to ensure that companies can reinvest in their operations, research and development, and further growth. Subsidies, tax holidays, and low-interest, government-subsidized loans may also be available to multinationals, but they are not considered the primary or most appropriate reward for their activities.

Question 3

The 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

Accepted Answer

The primary objective of the multinational corporation is to maximize shareholder wealth. This is because the corporation is ultimately responsible to its shareholders and their investments, and therefore seeks to generate profits and increase the value of their shares.

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

Accepted Answer

Reverse foreign investment refers to a situation where a foreign company invests in domestic facilities. Honda, a Japanese company, building a factory in Ohio, USA, is an example of this.

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

Accepted Answer

Cost minimizers specifically look for lower cost production sites overseas to reduce their overall production costs, which is why they fit the description given.

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

Accepted Answer

This is the definition of arbitrage. Internationalization refers to a company expanding into international markets, financing refers to obtaining capital for a business, and total risk is the overall risk of an investment portfolio.

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

Accepted Answer

IBM is most likely a market seeker multinational as it is investing in emerging markets like India to expand its customer base and increase its revenue. It is also partnering with local companies to gain access to these markets.

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

Accepted Answer

The answer of Companies gradually increase their commitment to international...

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

Accepted Answer

The multinational financial system enables companies to access lower cost financing sources, reduce taxes, and avoid currency controls. However, it does not completely eliminate exchange rate risk as companies still need to manage and hedge against fluctuations in exchange rates.

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

Accepted Answer

The theory of comparative advantage assumes scarcity of resources, so it cannot be considered a failing of the theory. However, choices A, B, and C are all valid criticisms of the theory. The theory does not take into account the impact of uncertainty on trade decisions or the potential for economies of scale to affect comparative advantage. It also assumes that factors of production are immobile, which may not always be the case. Additionally, the theory assumes that all products are homogeneous and do not have any differentiation, which is not always true in reality.

Question 11

The ___________ 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

Accepted Answer

Market seekers are firms that go overseas to produce and sell in foreign markets, which is the archetype of the modern multinational firm. The other choices are not closely related to this definition as follows: 
A) Cost minimizers - this refers to firms that go overseas to minimize their costs of production, which may or may not involve selling in foreign markets.
C) Raw-material seekers - this refers to firms that go overseas to acquire raw materials that may not be available in their home country, but does not necessarily involve selling in foreign markets.
D) Whaling companies - this is not relevant to the question, as it refers to a specific type of industry rather than a general archetype of a multinational firm.

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

Accepted Answer

Licensing can be an alternate or a precursor to setting up a production facility abroad as it involves giving permission to use the company's intellectual property or technology by another company in exchange for royalties or fees. This allows the company to earn revenue from its intellectual property without having to set up a production facility overseas.

Question 13

The 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

Accepted Answer

Good financial management is especially important in global markets because these markets are more prone to market imperfections and can have multiple tax rates. Effective financial management can help enhance an organization's ability to navigate these complexities and maximize its performance in the global economy.

Question 14

When 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

Accepted Answer

When a firm operates globally, it can gain greater negotiating power with labor unions by strategically moving operations to countries with more flexible labor laws and lower labor costs. This can give the firm leverage in negotiating wages and other benefits for its employees. However, global operations may not necessarily result in greater political power at home or lower taxes on profits. Additionally, negotiating power with foreign minority groups may depend on various factors such as cultural sensitivity and local regulations.

Question 15

___________ were the earliest multinationals.
A)raw-material seekers
B)market seekers
C)cost minimizers
D)oil companies

Accepted Answer

The earliest multinationals were raw-material seekers, which were companies that sought out natural resources such as spices, silk, and gold in foreign lands to bring back to their home country for profit. Examples of these earliest multinationals include the Dutch East India Company and the British East India Company.

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

Accepted Answer

The answer of Historically,the primary motive for U.S.multinationals to produce...

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

Accepted Answer

The first Iraq War did not have a significant impact on the acceleration of the global economy in the past twenty years. The other three choices all involved major trade agreements or openings of new markets, which contributed to the growth of the global economy.

Question 18

The 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.

Accepted Answer

Multinational corporations operate and compete globally, driving innovation, productivity, and efficiency. Through their operations and supply chains spanning multiple countries, they are a significant force in shaping global markets and driving competition. Public utility firms, financial management experience of U.S. markets, and the Federal Reserve System have their roles in the economy, but they do not have the broad global reach and impact of multinational corporations on competitiveness.

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

Accepted Answer

Limiting foreign sales or assets may result in missed opportunities for growth and profits. Instead, companies should assess the risks associated with entering foreign markets and implement strategies to manage those risks, such as conducting thorough market research, establishing strong partnerships with local companies, and having a plan for currency fluctuations. Companies can still achieve success in international markets while mitigating potential risks.

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

Accepted Answer

Increased global competition leads to the outsourcing of jobs and the shifting of manufacturing to countries with lower labor costs. This results in increased anxiety among workers in the old industrial countries who fear they may lose their jobs to cheaper labor abroad.

Quiz 1: Introduction

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

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

The primary objective of the multinational corporation is to

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

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

____________ 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.

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

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?

The multinational financial system does NOT enable companies to

Which of the following is NOT a failing of the theory of comparative advantage?

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

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

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

When a firm operates globally it offers advantages such as

___________ were the earliest multinationals.

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

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

The prime transmitter of global competitive forces is the

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

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