Question 1

Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar.  Which of the following is true
A) Japanese exporters can increase American sales by shift ing operations from their British subsidiaries to Japan.
B) British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain.
C) American exporters can increase sales to Japan by shift ing operations from Japanese subsidiaries to American subsidiaries.
D) B and C

Accepted Answer

When the Japanese yen depreciates against the dollar, goods produced in Japan become cheaper for American buyers, making it advantageous for Japanese exporters to shift operations back to Japan to increase sales in the American market. Conversely, if the British pound appreciates against the dollar, British goods become more expensive for American buyers, making it less advantageous to shift operations from Japan to Britain for the purpose of increasing American sales.

Question 2

Assume a U.S.firm initiates direct foreign investment in the U.K..  If the British pound is expected to appreciate against the dollar,the dollar value of earnings remitted to the parent should _______.  The parent may request that the subsidiary _______ in order to benefit from the expectation about the pound.
A) increase;postpone remitting earnings until the pound strengthens
B) decrease;postpone remitting earnings until the pound strengthens
C) decrease;remit earnings immediately before the pound strengthens
D) increase;remit earnings immediately before the pound strengthens

Accepted Answer

If the British pound is expected to appreciate against the dollar, it would mean that the dollar will have a lower value in terms of the pound. Therefore, the dollar value of earnings remitted to the parent should decrease. To benefit from the expected appreciation of the pound, the parent may request that the subsidiary postpone remitting earnings until the pound strengthens. This would allow the parent to receive a higher dollar value when the earnings are eventually remitted. Therefore, the best choice is A.

Question 3

If countries are highly influential upon each other,the correlations of their economic growth levels would likely be __________.  A firm would benefit __________ by diversifying sales among these countries relative to another set of countries that were not influential upon each other.
A) high and positive;more
B) close to zero;more
C) high and positive;less
D) close to zero;less

Accepted Answer

C

Question 4

Even if production costs are higher in a foreign country,a U.S.firm may establish a manufacturing plant in the foreign country now if:
A) the host government of that country eliminates all quotas.
B) the host government of that country reduces all quotas.
C) the host government of that country increases all quotas.
D) the host government of that country eliminates all tariffs.

Accepted Answer

The answer of Even if production costs are higher in...

Question 5

According to the text,a firm may be able to achieve a "more efficient" project portfolio if it:
A) focuses solely on one product.
B) focuses solely on one location to market what it produces.
C) A and B
D) none of the above

Accepted Answer

The text does not suggest that focusing solely on one product or location is the key to achieving a more efficient project portfolio. In fact, the text argues that firms should have a diverse and balanced project portfolio to mitigate risks and maximize returns.

Question 6

A country with high unemployment could best increase its employment by:
A) encouraging foreign firms to establish subsidiaries that produce the same products local firms produce.
B) encouraging foreign firms to establish licensing arrange ments for products local firms produce.
C) encouraging foreign firms to establish subsidiaries that produce products local firms do not produce.
D) none of the above would reduce employment.

Accepted Answer

By encouraging foreign firms to establish subsidiaries that produce products local firms do not produce, the country can increase its employment opportunities. This is because the introduction of new industries and products would lead to the creation of new jobs. Encouraging foreign firms to establish subsidiaries that produce the same products as local firms or establishing licensing arrangements would only increase competition for the existing jobs, potentially leading to downsizing or layoffs. Therefore, option C is the best choice for increasing employment in a country with high unemployment.

Question 7

According to information in the text,a host government would be least likely to provide incentives for direct foreign investment (DFI)into its country if the firm planning DFI:
A) would compete with local firms of the host country.
B) would produce a good not currently available in the host country.
C) would produce a good and export it to other countries.
D) B and C

Accepted Answer

If a foreign firm planning direct foreign investment would compete with local firms of the host country, the host government would be less likely to provide incentives as it may harm their domestic industries and create negative economic effects. Providing incentives could further worsen the competition for domestic firms, leading to job losses and financial strains. In contrast, if the foreign firm produces goods not currently available in the host country or exports goods to other countries, the host government may provide incentives to improve their economy's growth, create job opportunities, and attract foreign investments.

Question 8

According to your text,_______________ is a country that has been perceived as one of the most attractive sources of new demand.
A) Paraguay
B) Morocco
C) Sweden
D) China

Accepted Answer

The text mentions that China has been perceived as one of the most attractive sources of new demand.

Question 9

Based on the text,it should be obvious that markets are__________ in reality,and consequently,monopolistic advantages _________ be exploited.
A) perfect;may possibly
B) perfect;cannot
C) imperfect;may possibly
D) imperfect;cannot

Accepted Answer

The text mentions that markets are "imperfect" in reality, indicating that there are imperfections or inefficiencies in the market such as information asymmetry or barriers to entry. It also suggests that monopolistic advantages "may possibly" be exploited, implying that there is a possibility for firms to gain market power and charge higher prices.

Question 10

The __________ a project's variability in cash flows,and the __________ the positive correlation between the project's cash flow and MNC's cash flow,the lower the risk of the project.
A) higher;higher
B) higher;lower
C) lower;lower
D) lower;higher

Accepted Answer

A lower variability in cash flows means there is less uncertainty and risk associated with the project. A lower positive correlation between the project's cash flow and MNC's cash flow means that the project's success is not heavily dependent on the success of the MNC as a whole, thus reducing the overall risk of the project.

Question 11

Direct foreign investment would typically be welcomed if:
A) the products to be produced are substitutes for other locally produced products.
B) people from its headquarters country are transferred to the foreign country to work at the subsidiary.
C) the products to be produced are going to be exported.
D) all of the above

Accepted Answer

Direct foreign investment that involves producing products for export would typically be welcomed by the host country as it can help to increase their exports and create job opportunities. However, if the products produced by the foreign company are substitutes for locally produced products, it may create competition and negatively impact domestic firms. The transfer of employees from the headquarters country is not necessarily a factor for whether or not direct foreign investment would be welcomed.

Question 12

When a firm analyzes the feasibility of a project,it should consider the:
A) variability of the project's cash flow.
B) correlation of the project's cash flow relative to the prevailing cash flows of the MNC.
C) A and B
D) none of the above

Accepted Answer

When analyzing the feasibility of a project, a firm should consider both the variability of the project's cash flows and the correlation of the project's cash flows to the prevailing cash flows of the MNC. By considering the variability of the project's cash flows, the firm can assess the risk associated with the project. By considering the correlation of the project's cash flows to the MNC's cash flows, the firm can determine if the project will complement or compete with the MNC's existing operations. Therefore, the correct answer is C, as both A and B are important factors to consider.

Question 13

Most of the DFI by U.S.firms is Mexico.

Accepted Answer

Most of the Direct Foreign Investment (DFI) by U.S. firms is not concentrated in Mexico; it is more diversified across various countries, with significant investments in Europe and Asia as well.

Question 14

Which of the following is a reason to consider international business
A) economies of scale.
B) exploit monopolistic advantages.
C) diversification.
D) all of the above

Accepted Answer

All of the above are valid reasons to consider international business. Economies of scale can be achieved by expanding operations into new markets, exploiting monopolistic advantages can lead to higher profits and market dominance, and diversification can help reduce risk by accessing new markets with different economic conditions.

Question 15

From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:
A) is the top point.
B) is the point closest to the vertical axis.
C) is the point half way between the two end points.
D) cannot be determined since firms vary in their willing ness to accept risk.

Accepted Answer

The optimal point on an efficient frontier varies for each firm because it depends on the firm's specific risk tolerance and investment goals. The efficient frontier represents a set of portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given level of expected return. Since firms have different preferences and strategies regarding risk and return, there is no single point on the frontier that is optimal for all firms.

Question 16

Direct foreign investment is perceived by foreign governments to:
A) be a cause of national problems.
B) be a remedy for national problems.
C) either A or B is possible.
D) have no impact on national problems.

Accepted Answer

The perception of direct foreign investment varies by government and can be seen as either a cause or remedy for national problems. Some governments may view foreign investment as a threat to their local industries, while others may see it as a way to boost economic growth and development. Therefore, both A and B are possible depending on the perspective of the government in question.

Question 17

A firm will likely benefit most from diversifying if:
A) the correlations between country economies are high.
B) the correlations between country economies are low.
C) the variability of all country economy levels is high.
D) B and C

Accepted Answer

When the correlations between country economies are low, diversification is beneficial because when one economy is performing poorly, another economy may be performing well, which can balance out the negative impacts. If the correlations between country economies are high, economic downturns will affect all countries, leading to greater risks and fewer benefits from diversification. The variability of all country economy levels being high can indicate that diversification can be beneficial as it reduces the risks of loss due to country-specific economic issues. Therefore, both B and C are not correct as the first statement is correct.

Question 18

Consider a country that presently has a high level of unemployment because of weak economic conditions.Its income levels are very low.This country may be an attractive target as a result of ______ motives by U.S.firms that engage in direct foreign investment.
A) revenue-related
B) cost-related
C) A and B
D) none of the above

Accepted Answer

The answer of Consider a country that presently has a...

Question 19

When a foreign currency is perceived by a firm to be undervalued,the firm may consider direct foreign investment in that country,as the initial outlay should be relatively low.

Accepted Answer

When a foreign currency is undervalued, it means that a firm's home currency can be exchanged for more of the foreign currency. This makes the initial investment in the foreign country relatively cheaper and more affordable for the firm, which may encourage direct foreign investment.

Question 20

Consider Firm "A" and Firm "B" that both produce the same product.  Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were __________ and the number of foreign countries it sold products to was __________.
A) higher;large.
B) higher;small
C) lower;small
D) higher;large

Accepted Answer

A higher percentage of foreign sales would make the cash flows of firm A more stable as it would be less dependent on the economic conditions of a single market. Additionally, selling its products to a large number of foreign countries would also increase the diversification of its revenue stream, further stabilizing its cash flows.

Quiz 13: Direct Foreign Investment

Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true

Assume a U.S.firm initiates direct foreign investment in the U.K.. If the British pound is expected to appreciate against the dollar,the dollar value of earnings remitted to the parent should _. The parent may request that the subsidiary _ in order to benefit from the expectation about the pound.

If countries are highly influential upon each other,the correlations of their economic growth levels would likely be . A firm would benefit by diversifying sales among these countries relative to another set of countries that were not influential upon each other.

Even if production costs are higher in a foreign country,a U.S.firm may establish a manufacturing plant in the foreign country now if:

According to the text,a firm may be able to achieve a "more efficient" project portfolio if it:

A country with high unemployment could best increase its employment by:

According to information in the text,a host government would be least likely to provide incentives for direct foreign investment (DFI) into its country if the firm planning DFI:

According to your text,_______________ is a country that has been perceived as one of the most attractive sources of new demand.

Based on the text,it should be obvious that markets are__ in reality,and consequently,monopolistic advantages _ be exploited.

The a project's variability in cash flows,and the the positive correlation between the project's cash flow and MNC's cash flow,the lower the risk of the project.

Direct foreign investment would typically be welcomed if:

When a firm analyzes the feasibility of a project,it should consider the:

Most of the DFI by U.S.firms is Mexico.

Which of the following is a reason to consider international business

From the concept of an "efficient frontier," the point on a frontier that is optimal for all firms:

Direct foreign investment is perceived by foreign governments to:

A firm will likely benefit most from diversifying if:

Consider a country that presently has a high level of unemployment because of weak economic conditions.Its income levels are very low.This country may be an attractive target as a result of ______ motives by U.S.firms that engage in direct foreign investment.

When a foreign currency is perceived by a firm to be undervalued,the firm may consider direct foreign investment in that country,as the initial outlay should be relatively low.

Consider Firm "A" and Firm "B" that both produce the same product. Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were and the number of foreign countries it sold products to was .