Corporate Finance (with International Focus)
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Course Introduction
This course explores the fundamental principles of corporate finance with a particular emphasis on international contexts. Students will examine topics such as capital budgeting, risk management, capital structure, and working capital management, alongside the challenges posed by global financial markets, exchange rate risk, and cross-border investment decisions. Through case studies and real-world applications, the course provides insight into how multinational corporations make financial decisions and manage their resources in a dynamic international environment.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
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12 Chapters
706 Verified Questions
706 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) International economics can be divided into two broad sub-fields
A) macro and micro.
B) developed and less developed.
C) monetary and barter.
D) international trade and international money.
E) static and dynamic.
Answer: D
Q2) For almost 70 years international trade policies have been governed
A) by the World Trade Organization.
B) by the International Monetary Fund.
C) by the World.
D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT).
E) by the North American Free Trade Agreement (NAFTA).
Answer: D
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Chapter 2: National Income Accounting and the Balance of Payments
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Sample Questions
Q1) The German government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy French currency from its citizens.How is this accounted for in the balance of payments?
A) current account, French good export
B) current account, German good import
C) financial account, French asset export
D) financial account, German asset export
E) financial account, German asset import
Answer: C
Q2) Discuss the values of private saving in closed and open economies.
Answer: In a closed economy,private saving, S ,is equals to,I + (G - T).In a open economy,private saving, S ,is equals to I + CA + (G - T).Open economy helps in extending the opportunities for private saving or dis-saving,or borrowing.
Q3) What are the main aspects of economic life that macroeconomics analysis is most concerned with?
Answer: There are four main aspects: unemployment,saving,trade imbalances,and money and the price level.
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Page 4
Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian Model
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Sample Questions
Q1) Assume that labor is the only factor of production and that wages in the United States equal $20 per hour while wages in Japan are $10 per hour.Production costs would be lower in the United States as compared to Japan if
A) U.S. labor productivity equaled 40 units per hour and Japan's 15 units per hour.
B) U.S. labor productivity equaled 30 units per hour and Japan's 20 units per hour.
C) U.S. labor productivity equaled 20 units per hour and Japan's 30 units per hour.
D) U.S. labor productivity equaled 15 units per hour and Japan's 25 units per hour.
E) U.S. labor productivity equaled 15 units per hour and Japan's 40 units per hour.
Answer: A
Q2) Given the information in the table above.If these two countries trade these two goods with each other in context of the Ricardian model of comparative advantage,what is the lower limit for the price of cloth?
Answer: One half a widget.
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Chapter 4: Specific Factors and Income Distribution
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Sample Questions
Q1) Refer to the production possibility graph above.Assume that the economy is in equilibrium at point e.If a war reduces the country's capital stock by 40%,the new equilibrium is most likely to be
A) point b.
B) point h.
C) point f.
D) point d.
E) point e.
Q2) In modern economies,
A) restrictions on international labor mobility are common.
B) labor is far more mobile internationally than capital.
C) restrictions on international labor mobility are rare.
D) labor is far more mobile internationally than it is intra-nationally.
E) outsourcing increases international labor mobility.
Q3) A factor of production that can be used in any sector of an economy is a(an)
A) mobile factor.
B) specific factor.
C) variable factor.
D) import-competing factor.
E) export-competing factor.
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Chapter 5: Resources and Trade: The Heckscher-Ohlin Model
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Sample Questions
Q1) The Heckscher-Ohlin model predicts all of the following EXCEPT
A) the volume of trade.
B) which country will export which product.
C) which factor of production within each country will gain from trade.
D) that relative wages will tend to become equal in both trading countries.
E) that trade increases a country's overall welfare.
Q2) The Leontief Paradox
A) failed to support the validity of the Heckscher-Ohlin model.
B) supported the validity of the Ricardian theory of comparative advantage.
C) supported the validity of the Heckscher-Ohlin model.
D) failed to support the validity of the Ricardian theory.
E) proved that the U.S. economy is different from all others.
Q3) The assumption of diminishing returns in the Heckscher-Ohlin model means that,unlike in the Ricardian model,it is likely that
A) countries will not be fully specialized in one product.
B) countries will benefit from free international trade.
C) countries will consume outside their production possibility frontier.
D) comparative advantage will not determine the direction of trade.
E) global production will decrease under trade.
Q4) "A good cannot be both land- and labor-intensive." Discuss.
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Chapter 6: The Standard Trade Model
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Sample Questions
Q1) An export subsidy will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
A) exports; decrease; exports; increase
B) imports; decrease; imports; increase
C) imports; increase; imports; decrease
D) exports; increase; exports; decrease
E) exports; increase; imports; decrease
Q2) The intertemporal tradeoff between present and future consumption is measured by the
A) real interest rate.
B) inflation rate.
C) nominal interest rate.
D) terms of trade.
E) rate of economic growth.
Q3) Suppose Albania is exporting product B,and experienced economic growth biased in favor of product B as seen in the figure above.We are also told that Albania's new consumption point is at point d.Would you still consider the economic growth,which took place biased in favor of B? If Albania were a large country how would this growth affect its terms of trade?
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Page 8
Chapter 7: External Economies of Scale and the
International Location of Production
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Sample Questions
Q1) The existence of external economies of scale
A) may be associated with a perfectly competitive industry.
B) cannot be associated with a perfectly competitive industry.
C) tends to result in one huge monopoly.
D) tends to result in large profits for each firm.
E) focuses more on individual firms than the industry as a whole.
Q2) If output is increased in the long-run,average production costs in the presence of internal diseconomies of scale will ________,and in the presence of external diseconomies of scale,will ________.
A) decrease; decrease
B) increase; remain constant
C) remain constant; increase
D) decrease; remain constant
E) increase; decrease
Q3) If a scale economy is the dominant technological factor defining or establishing comparative advantage,then the underlying facts explaining why a particular country dominates world markets in some product may be pure chance,or historical accident.Explain,and compare this with the answer you would give for the Heckscher-Ohlin model of comparative advantage.
Page 9
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Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
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Sample Questions
Q1) Refer to above figure.While selling exports it would also maximize its domestic sales by equating its marginal (opportunity)cost to its marginal revenue of $5.How much steel would the firm sell domestically,and at what price?
Q2) Refer to above figure.Given the opportunity to sell at world prices,the marginal (opportunity)cost of selling a ton domestically is what?
Q3) A monopoly firm engaged in international trade will
A) equate marginal costs with marginal revenues in both domestic and foreign markets.
B) equate average to local costs.
C) equate marginal costs with foreign marginal revenues.
D) equate marginal costs with the highest price the market will bear.
E) equate marginal costs with the relative world prices.
Q4) An imperfectly competitive firm has the following demand curve: Q = 100 - 2P.What is marginal revenue equal to when P = 40?
Q5) What are the consequences of outsourcing production on the welfare of countries?
Q6) Refer to above figure.The monopolist can export as much as it likes of its steel at the world price of $5/ton.How much steel will the monopolist sell,and at what price?
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Chapter 9: The Instruments of Trade Policy
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Sample Questions
Q1) Refer to above figure.Given a tariff of $3 per unit,what is the country's consumer surplus?
Q2) Refer to above figure.The lowest specific tariff which would be considered prohibitive is ________.
Q3) The effective rate of protection measures
A) the "true" ad valorem value of a tariff.
B) the quota equivalent value of a tariff.
C) the efficiency with which the tariff is collected at the customhouse.
D) the protection given by the tariff to domestic value added.
E) the difference between domestic and foreign prices of the import.
Q4) Refer to above figure.In the absence of trade,what is the country's producer surplus?
Q5) An export subsidy will ________ producer surplus,________ consumer surplus,________ government revenue,and ________ overall domestic national welfare.
A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease
C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease
E) increase; increase; decrease; have an ambiguous effect on
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Chapter 10: The Political Economy of Trade Policy
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Sample Questions
Q1) Presumably,since the United States is a large country in many of its international markets,a positive optimum tariff exists for this country.It follows therefore that when any legislator or government official who promotes zero-tariff free trade policies,is by definition not acting in the public's best interest.Discuss.
Q2) The U.S.is probably the most open international market among the industrialized countries.What then does the U.S.have to gain by joining the WTO?
Q3) Judging by the ongoing changes in tariff rates in major trading countries,the world has been experiencing a great
A) trade liberalization.
B) surge of protectionism.
C) lack of progress in the trade-policy area.
D) move towards regional integration.
E) shift from export subsidies to specific tariffs.
Q4) Refer to above figure.What is the revenue gain or loss for Europe as a whole (including taxpayers)?
Q5) Refer to above figure.Assume that Boeing is the first to enter the Hungarian market.Without a government subsidy what price would they demand,and what would be their total profits?
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Chapter 11: Trade Policy in Developing Countries
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Sample Questions
Q1) Which industrialization policy used by developing countries places emphasis on the comparative advantage principle as a guide to resource allocation?
A) export promotion
B) import substitution
C) international commodity agreements
D) Infant Industry promotion
E) intra-industry trade practice
Q2) In 2003,the per-capita income in China was roughly ________ of that in the U.S.
A) one hundredth
B) one eighth
C) one half
D) the same as
E) one twentieth
Q3) The imperfect capital market justification for infant industry promotion
A) assumes that new industries will tend to have low profits.
B) assumes that infant industries will soon mature.
C) assumes that infant industries will be in products of comparative advantage.
D) assumes that banks can allocate resources efficiently.
E) assumes that developing country will reward the donor country.
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Chapter 12: Controversies in Trade Policy
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Sample Questions
Q1) Working conditions for clothing workers in Bangladesh are very poor.If countries refuse to buy clothing from Bangladesh in order to encourage change,the effect is likely to be that
A) firms will be forced to comply and workers will be better off.
B) firms will refuse to comply, but workers will be better off.
C) firms will try to comply and workers will be worse off.
D) firms will try to comply and workers will be better off.
E) regardless of how firms respond, workers will be better off.
Q2) The Brander-Spencer model identified market failure in certain industries due to A) unfair competition.
B) wildcat destructive competition.
C) environmental negative externalities associated with pollution.
D) limited competition.
E) lack of excess returns.
Q3) Spencer and Brander's model highlights the existence of A) aircraft industries.
B) excess returns present in highly competitive markets.
C) excess returns, or rents, available in non-competitive markets.
D) the futility of government bureaucrats' attempts to build an airplane.
E) natural advantages in foreign technology firms.
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