Question 1

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

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?
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 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
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 4

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 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.
A) raw-material seekers
B) market seekers
C) cost minimizers
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.
A) cost minimizers
B) market seekers
C) raw-material seekers
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?
A) product life cycle theory of international trade
B) theory of diversification
C) doctrine of comparative advantage
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.
A) internationalization
B) arbitrage
C) financing
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
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

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.
A) profits
B) subsidies
C) tax holidays
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?
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 12

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 spreading out an investment portfolio across different asset classes and geographic regions to reduce risk. Investing internationally allows for exposure to economies and industries that may not be present domestically, and diversifying across countries can reduce the impact of localized market fluctuations on the portfolio as a whole.

Question 13

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

Accepted Answer

Critics of multinational corporations tend to fault their pursuit of profits over social and environmental responsibility. Therefore, they would not fault their engagement in environmental protection measures. On the other hand, they could fault their tendencies to shift production to lower the costs, avoid taxes, or cause balance of payments difficulties.

Question 14

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

The multinational corporation is the best choice for being the prime transmitter of global competitive forces. Multinational corporations have significant global reach and impact on various aspects of national economies, such as employment, taxation, and market competition. They also have a greater ability to exploit the benefits of globalization, such as access to global markets and lower production costs. The financial management experience of the U.S. markets and the Federal Reserve System of the U.S. are significant factors in the global economy, but they are not the prime transmitters of global competitive forces. The public utility firm is a local entity that provides essential services to the community and is not a significant player in the global economy.

Question 15

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 16

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 highly valued in the global markets due to the presence of market imperfections and multiple tax rates. Such imperfections increase the probability of financial risk and uncertainty. Good financial management, on the other hand, helps to minimize these risks and uncertainties, ensuring that businesses operate optimally and adapt to market conditions. Consequently, good financial management enhances a company's competitiveness in the global markets.

Question 17

___________ 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 18

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, as they have locations in various countries specifically to access and serve those markets.

Question 19

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 accelerating the growth of the global economy. The other three choices all involved major economic agreements or changes that increased trade and allowed for greater economic integration between countries.

Question 20

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...

Quiz 1: Introduction: Multinational Enterpriseand Multinational Financial Management

internationalization process tends to

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

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

multinational financial system does NOT enable companies to

___________ were the earliest multinationals.

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

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

____________ 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.

According to the capital asset pricing model

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

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

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

Critics of the multinational corporation would not fault its tendency to

prime transmitter of global competitive forces is the

a firm operates globally it offers advantages such as

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

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

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

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

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