Question 1

internationalization process tends to&#10;A) proceed in a preprogrammed series of steps&#10;B) begin by licensing foreign producers&#10;C) inevitably involve foreign production&#10;D) often begin by accident

Accepted Answer

The internationalization process often begins by accident, where a company may receive unexpected orders from foreign customers or suppliers or identify an opportunity to enter a new market. It is not a preprogrammed series of steps, and foreign production or licensing may or may not be involved depending on the specific strategy chosen by the company.

Question 2

Which one of the following is a consequence of increased global competition?&#10;A) the creation of new steel plants in the old industrial countries&#10;B) the end of free-trade agreements between governments of the world&#10;C) increased comfort level of trade unions with the consequences&#10;D) increased anxiety among workers in the old industrial countries

Accepted Answer

Increased global competition leads to a higher likelihood of job loss and decreased job security in industries that are facing competition from countries with lower labor costs. This can lead to increased anxiety among workers in countries that are experiencing this type of competition.

Question 3

Given the added risks associated with doing business abroad, companies should&#10;A) limit their foreign sales to less than 40% of total sales&#10;B) limit their foreign assets to less than 30% of total assets&#10;C) avoid foreign markets altogether unless they can earn a return in excess of the return they earn in their domestic market&#10;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 4

multinational financial system does NOT enable companies to&#10;A) avoid currency controls&#10;B) reduce taxes&#10;C) access lower cost financing sources&#10;D) avoid exchange rate risk

Accepted Answer

The multinational financial system may enable companies to avoid currency controls, reduce taxes, and access lower cost financing sources, but it does not fully eliminate exchange rate risk, as fluctuations in currency values can still have an impact on international transactions and profitability.

Question 5

___________ were the earliest multinationals.&#10;A) raw-material seekers&#10;B) market seekers&#10;C) cost minimizers&#10;D) oil companies

Accepted Answer

The earliest multinationals were primarily raw-material seekers who were looking for resources such as precious metals, spices, and natural resources to bring back to Europe. They established colonies and trading posts around the world to secure access to these raw materials.

Question 6

___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.&#10;A) cost minimizers&#10;B) market seekers&#10;C) raw-material seekers&#10;D) whaling companies

Accepted Answer

Market seekers are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets. They seek out foreign markets with high demand for their products or services and establish operations there to capture market share. This approach differs from cost minimizers, who focus on reducing costs through low-wage labor or access to cheap raw materials, and raw-material seekers, who establish operations overseas to gain access to natural resources. Whaling companies do not fit the archetype of the modern multinational firm.

Question 7

Which of the following theories identifies specialization as the main reason for international business activity?&#10;A) product life cycle theory of international trade&#10;B) theory of diversification&#10;C) doctrine of comparative advantage&#10;D) theory of globalization

Accepted Answer

The doctrine of comparative advantage states that each country should specialize in producing the goods and services it can produce most efficiently and trade with other countries for goods and services they can produce most efficiently. Therefore, specialization is the main reason for international business activity. The product life cycle theory of international trade explains how the location of production shifts as a product moves through its life cycle, the theory of diversification suggests that firms expand into different businesses to reduce risk, and the theory of globalization focuses on the increased interconnectedness and interdependence of the world economy.

Question 8

____________ 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.&#10;A) internationalization&#10;B) arbitrage&#10;C) financing&#10;D) total risk

Accepted Answer

Arbitrage is the act of buying an asset on one market to immediately sell it on another market for a profit based on a price difference. This practice is often used to exploit inefficiencies or market discrepancies between different markets.

Question 9

According to the capital asset pricing model&#10;A) only the systematic component of risk affects the required return&#10;B) foreign investments whose returns are uncorrelated with the market's return should have a higher required return than comparable domestic investments&#10;C) total risk of the investment is most relevant for small to medium-sized firms&#10;D) diversification is secondary to risk levels of the investment

Accepted Answer

The capital asset pricing model (CAPM) states that the required return on an asset is determined by the systematic risk (beta) of the asset, not the total risk. Systematic risk cannot be diversified away, so it is the main factor that affects the required return. Therefore, choice A is correct. Choice B is incorrect as the CAPM assumes that investors only care about systematic risk and not about diversifying away specific risk. Choice C is incorrect as the CAPM applies to all firms, not just small to medium-sized ones. Choice D is incorrect as diversification plays a crucial role in reducing specific risk.

Question 10

defenders of multinationals believe that __________ are the appropriate reward for efficiently providing the global economy with products and services.&#10;A) profits&#10;B) subsidies&#10;C) tax holidays&#10;D) low-interest, government-subsidized loans

Accepted Answer

Defenders of multinationals argue that profits are the appropriate reward for efficiently providing products and services in the global economy. They believe that these profits incentivize companies to innovate and invest in research and development, ultimately leading to economic growth and job creation. Subsidies, tax holidays, and low-interest, government-subsidized loans can also be viewed as incentives, but they may not always be necessary or appropriate in every situation.

Question 11

Which of the following is an example of reverse foreign investment?&#10;A) Honda builds a factory in Ohio&#10;B) Apple builds a plant in Ireland that exports to the United States&#10;C) British Telecom issues new stock in the United States&#10;D) American investors buy shares in Sony

Accepted Answer

The answer of Which of the following is an example...

Question 12

International ________ can reduce the volatility of an investment portfolio because national financial markets tend to move independently of each other.&#10;A) arbitrage&#10;B) centralization of the MNC's cash&#10;C) diversification&#10;D) investment

Accepted Answer

The answer of International ________ can reduce the volatility of...

Question 13

Critics of the multinational corporation would not fault its tendency to&#10;A) shift production from one location to another in search of lower costs&#10;B) avoid taxes&#10;C) cause balance of payments difficulties&#10;D) engage in environmental protection measures

Accepted Answer

The answer of Critics of the multinational corporation would not...

Question 14

prime transmitter of global competitive forces is the&#10;A) public utility firm&#10;B) financial management experience of the U.S. markets&#10;C) the multinational corporation&#10;D) the Federal Reserve System of the U.S.

Accepted Answer

The answer of prime transmitter of global competitive forces is...

Question 15

a firm operates globally it offers advantages such as&#10;A) greater political power at home&#10;B) bless taxes on its profits&#10;C) greater negotiating power with foreign minority groups&#10;D) greater negotiating power with labor unions

Accepted Answer

The answer of a firm operates globally it offers advantages...

Question 16

value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates.&#10;A) minimized&#10;B) neutralized&#10;C) enhanced&#10;D) arbitraged away

Accepted Answer

The answer of value of good financial management is ___________...

Question 17

___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.&#10;A) Cost minimizers&#10;B) Market seekers&#10;C) Raw-material seekers&#10;D) High tech firms

Accepted Answer

The answer of ___________ are a recent category of multinationals...

Question 18

Referring to the text, into which category of multinational is IBM most likely to fall?&#10;A) raw materials seeker&#10;B) market seeker&#10;C) cost minimizer&#10;D) hedge fund

Accepted Answer

The answer of Referring to the text, into which category...

Question 19

Which of the following did NOT accelerate the growth of the global economy in the past twenty years?&#10;A) the U.S.-Canada-Mexico free-trade pact&#10;B) the creation of the European Union&#10;C) China's entrance into the WTO&#10;D) the first Iraq War

Accepted Answer

The answer of Which of the following did NOT accelerate...

Question 20

Historically, the primary motive for U.S. multinationals to produce abroad has been to&#10;A) lower costs&#10;B) respond more quickly to the marketplace&#10;C) avoid trade barriers&#10;D) gain tax benefits

Accepted Answer

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

Question 21

the multinational corporation, which one of the following complements to the integration of world wide operations is MOST critical?&#10;A) flexibility&#10;B) adaptability&#10;C) speed&#10;D) economies of scale of distribution

Accepted Answer

The answer of the multinational corporation, which one of the...

Question 22

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&#10;A) Avoids risk at any price&#10;B) Manages effectively the political environment of the subsidiary country&#10;C) Anticipates every future disturbance related to the supply chain&#10;D) Makes decisions that anticipates problems and provides solutions that enhances the firm's prospects for growth

Accepted Answer

The answer of According to Shapiro, if you were the...

Question 23

According to the efficient market hypothesis, which one of the following is NOT correct?&#10;A) markets place a premium on the future&#10;B) today's stock price is the best predictor of tomorrow's stock price&#10;C) stock prices reflect all available information&#10;D) today's stock price incorporates the past history of prices

Accepted Answer

The answer of According to the efficient market hypothesis, which...

Deck 1: Introduction: Multinational Enterpriseand Multinational Financial Management