International Business
Final Exam
Course Introduction
International Business explores the complexities of operating in the global marketplace, examining how cultural, economic, legal, and political environments impact business decisions and strategy. Students learn about international trade theories, global financial systems, cross-border investment, and multinational operations, with a focus on adapting business practices to diverse markets. The course also addresses the challenges of managing international teams, navigating ethical considerations, and leveraging global opportunities for growth and innovation.
Recommended Textbook
International Business 9th Edition by Charles W. L. Hill
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Chapter 1: Globalization
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Q1) In late 2001,the WTO launched a new round of talks in Doha aimed at:
A) helping member states to cope with financial crisis.
B) further liberalization of the global trade and investment framework.
C) protecting national economies from global competition.
D) promoting higher standards of living in all member states.
Answer: B
Q2) Globalization of markets has resulted in greater differentiation of consumer tastes and preferences.
A)True
B)False
Answer: False
Q3) Current trends indicate the world is moving toward an economic system that is more favorable for international business.
A)True
B)False
Answer: True
Q4) Globalization reduces the risks of global financial contagion.
A)True
B)False
Answer: False
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Chapter 2: National Differences in Political Economy, and Legal Systems
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Q1) Which of the following statements about individualism is NOT true?
A) Individualism promotes private entrepreneurship.
B) Individualism promotes free market economics.
C) Individualism creates an anti-business environment.
D) Individualism advocates for a democratic political system.
Answer: C
Q2) In a market economy,if demand for a product exceeds supply,prices will rise,signaling to producers to produce more.
A)True
B)False
Answer: True
Q3) Property rights refer to the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.
A)True
B)False
Answer: True
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Chapter 3: National Differences in Economic Development
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Q1) How does the ownership structure of newly privatized firms affect its functioning?
Answer: Many former command economies lack the legal regulations regarding corporate governance that are found in advanced Western economies.In such cases,managers with a small ownership stake can often gain control over the newly privatized entity and run it for their own benefit,while ignoring the interests of other shareholders.
Q2) The influential Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until _____.
A) they have political stability
B) they invest in infrastructural development
C) they have better defined and secure property rights
D) they have adequate market regulation
Answer: C
Q3) Totalitarian states promote human freedom and human development,which facilitates economic progress.
A)True
B)False
Answer: False
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5
Chapter 4: Differences in Culture
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Q1) Since English is often thought of as the global language of business,it is not important for an American business executive to learn foreign languages.
A)True
B)False
Q2) People who take food or safety for granted tend to be xenophobic,are wary of political activity,have authoritarian tendencies,and believe that men make better political leaders than women.
A)True
B)False
Q3) The protection of the right to private property is embedded within Islam.
A)True
B)False
Q4) Discuss Confucian dynamism.Explore the debate over whether Confucian dynamism is good for an economy.
Q5) According to Max Weber,Protestantism encouraged capitalism's development by emphasizing the importance of wealth creation and frugality.
A)True
B)False
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Page 6
Chapter 5: Ethics, corporate Social Responsibility, and Sustainability
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Q1) How can companies strengthen the moral courage of employees?
Q2) The Friedman doctrine is the belief that ethics are nothing more than a reflection of culture and therefore,a firm should adopt the ethics of the culture in which it is operating.
A)True
B)False
Q3) Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics because of all of the following reasons EXCEPT:
A) they are away from their ordinary social context and supporting culture.
B) they are psychologically and geographically closer to the parent company.
C) they may be based in a culture that does not place the same value on ethical norms important in the manager's home country.
D) they may be surrounded by local employees who have less rigorous ethical standards.
Q4) Rights theories recognize that human rights and privileges are culturally determined and vary from country to country.
A)True
B)False
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Chapter 6: International Trade Theory
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Q1) Explain how the principle of diminishing returns weakens the Ricardian model.
Q2) The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains.
A)True
B)False
Q3) New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.
A)True
B)False
Q4) Identify the theory that argues that advanced nations have an incentive to develop a new offering and hence such nations always tend to create a good or service for the first time.
A) Absolute advantage
B) Ricardo
C) Product life-cycle
D) Heckscher-Ohlin
Q5) Explain how the rivalry within an industry affects international competence.
Q6) Explain the dynamic gains that are generated by opening an economy to trade.
Page 8
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Chapter 7: Government Policy and International Trade
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Q1) Tariff barriers lower the costs of exporting products to a country.
A)True
B)False
Q2) A key goal of the 1986 Uruguay Round was to extend GATT to cover trade in commodities.
A)True
B)False
Q3) Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.
A)True
B)False
Q4) What are the political reasons for governments to intervene in markets?
Q5) The Smoot-Hawley Act aimed at:
A) diverting consumer demand toward foreign products.
B) promoting unrestricted free trade.
C) limiting global warming.
D) avoiding rising unemployment.
Q6) Explain how governments use administrative trade policies to boost exports and restrict imports.Provide an example of an administrative trade policy.
Page 9
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Chapter 8: Foreign Direct Investment
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Q1) According to Knickerbocker's theory:
A) when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI.
B) when a firm's skills and know-how are not amenable to licensing, it usually prefers the FDI route.
C) by placing tariffs on imported goods, governments indirectly increase the cost of exporting relative to foreign direct investment and licensing.
D) when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments.
Q2) The majority of cross-border investment in the developed world is in the form of greenfield investments rather than mergers and acquisitions.
A)True
B)False
Q3) Governments normally are concerned when their country is running a surplus on the current account of their balance of payments.
A)True
B)False
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Chapter 9: Regional Trade Pacts Give the Mexican Auto
Industry an Edge
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Q1) The emerging role of the European Commission in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions.
A)True
B)False
Q2) The Council of the European Union is responsible for proposing EU legislation,implementing it,and monitoring compliance with EU laws by member states.
A)True
B)False
Q3) According to Alexander Yeats:
A) the trade diversion effects of Mercosur outweigh its trade creation effects.
B) the fastest growing items in intra-Mercosur trade were capital-intensive goods produced efficiently in the member countries.
C) Mercosur countries will be able to compete globally once the group's external trade barriers come down.
D) the customs union is becoming more perfect over time.
Q4) What is the political case for integration? How did political arguments influence the establishment of the European Union?
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Chapter 10: The Foreign Exchange Market
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Q1) Which of the following is referred to as the purchasing power parity puzzle?
A) Reduced levels of inflation in countries where the growth in the money supply is faster than the growth in its output.
B) The reason why countries with high inflation rates see depreciation in their currency exchange rates.
C) Identical products being sold in different countries for the same price when their price is expressed in terms of the same currency.
D) The failure to find a strong link between relative inflation rates and exchange rate movements.
Q2) Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about future currency movements.
A)True
B)False
Q3) Explain the notion of economic exposure.How can economic exposure be minimized?
Q4) What is a currency swap?
Q5) Describe translation exposure.How can translation exposure be minimized?
Q6) Explain PPP.Use an example to show how PPP can help explain exchange rates.
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Q7) What are the main uses of foreign exchange markets for international business?
Chapter 11: The International Monetary System
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Q1) Compare currency crisis,banking crisis,and foreign debt crisis.
Q2) A pegged exchange rate means that the value of a currency is _____.
A) fixed against other currencies based on an agreement
B) not determined by free market forces
C) fixed relative to a reference currency
D) independent of the valuations of other currencies
Q3) The monetary autonomy argument holds that _____.
A) each country should be allowed to choose its own inflation rate
B) inflation is beneficial to a country's economy and growth
C) inflation is detrimental to a country's economy and growth
D) countries should restrict inflation based on the global standards
Q4) Compare and contrast a pegged exchange system with a dirty float system of exchange rates.
Q5) Exchange rates are determined by the government under a pure "free float" system. A)True
B)False
Q6) Discuss the arguments that favor a floating exchange rate system against a fixed exchange rate system.
Q7) Explain the events that led to the failure of the Bretton Woods system.
Page 13
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Chapter 12: The Global Capital Market
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Q1) The cost of capital is the difference between cost of inputs and outputs.
A)True
B)False
Q2) Eurobonds are normally underwritten by an international syndicate of banks.
A)True
B)False
Q3) Financial services is an information-intensive industry.
A)True
B)False
Q4) How can a borrower hedge against unpredictable movements in exchange rates?
Q5) The relatively low correlation between the movement of stock markets in different countries indicates that _____.
A) diversifying a portfolio will increase the risk of investing
B) most countries face similar economic conditions
C) countries pursue different macroeconomic policies
D) different stock markets are not segmented from each other
Q6) What are foreign bonds?
Q7) How does the growth in the global capital markets affect investing firms?
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Q8) Explain the changes observed in the risk of investments when an investor increases the number of stocks in her portfolio.
Chapter 13: The Strategy of International Business
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Q1) Which of the following is an example of a primary activity in a firm's value chain?
A) Information systems
B) Research and development
C) Logistics
D) Human relations
Q2) Economies that arise from performing a value creation activity in the optimal place for that activity are referred to as:
A) factor economies.
B) production economies.
C) location economies.
D) value creation economies.
Q3) Global expansion offers companies the opportunity to generate greater profits than companies that focus strictly on the domestic market.
A)True
B)False
Q4) What are the two types of competitive pressures that firms competing in the global marketplace face? How do firms respond to these pressures?
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Chapter 14: The Organization of International Business
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Q1) What is a knowledge network? What is the advantage of such a system?
Q2) In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems?
A) Global matrix structure
B) International division structure
C) Worldwide product division structure
D) Worldwide area structure
Q3) Control through a system of rules and procedures that directs the actions of subunits is:
A) personal control.
B) bureaucratic control.
C) output control.
D) cultural control.
Q4) In firms pursuing a transnational strategy,some operating decisions are relatively centralized,while others are relatively decentralized.
A)True
B)False
Q5) Discuss the issues involved in unfreezing an organization.
Q6) What are the three dimensions of organizational structure?
Page 16
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Chapter 15: Entry Strategy and Strategic Alliances
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Q1) What are the two methods of entering foreign marketing using a wholly owned subsidiary?
Q2) According to the _____,top managers typically overestimate their ability to create value from an acquisition.
A) misvaluation theory
B) performance extrapolation hypothesis
C) market timing theory
D) hubris hypothesis
Q3) Which of the following is a distinct advantage of exporting?
A) It avoids the threat of tariff barriers by the host-country government.
B) Firms benefit from a local partner's knowledge of the host country's competitive conditions.
C) It avoids the often substantial costs of establishing manufacturing operations in the host country.
D) It is appropriate if lower cost locations for manufacturing the product can be found abroad.
Q4) Why should a firm choose exporting as a means of foreign market expansion? Discuss the advantages and disadvantages of exporting.
Q5) Discuss the three primary characteristics of a good ally.
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Chapter 16: Exporting, importing, and Countertrade
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Q1) Counterpurchase occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
A)True
B)False
Q2) Exporters often face voluminous paperwork and complex formalities.
A)True
B)False
Q3) What is the main attraction of countertrade?
Q4) Barter is a reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
A)True
B)False
Q5) The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank.
A)True
B)False
Q6) Explain countertrade and its purpose.
Q7) What type of firms are most likely to engage in countertrade? Why?
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Chapter 17: Global Production and Supply Chain Management
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Q1) Explain how fixed costs impact the decision to locate a plant.
Q2) Which of the following statements is true of Web-based EDI systems?
A) Web-based EDI systems are more expensive than proprietary solutions.
B) Small firms will not be able to make use of Web-based EDI systems
C) Web-based systems are much easier to install compared to proprietary solutions.
D) Most Web-based systems are implemented to support proprietary solutions.
Q3) When a company's product has a low value-to-weight ratio,the company should _____.
A) produce the product from two or three optimal locations and ship products from there
B) manufacture products from a centralized location
C) ignore transportation costs as they would only be a minor part
D) produce the product in multiple locations close to major markets
Q4) RSA is a bicycle manufacturing company.Which of the following is a make-or-buy decision that the company will have to make?
A) Should the company increase its responsiveness toward the retailers?
B) What are the products that the company should manufacture?
C) Should the company outsource production to a low-cost vendor?
D) What should be the pricing strategy of the company's product?
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Chapter 18: Global Marketing and Rd
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Q1) ____ refers to the expertise,competencies,and skills of established retailers in a nation,and their ability to sell and support the products of international businesses.
A) Channel exclusivity
B) Channel knowledge
C) Channel quality
D) Channel skill
Q2) The most important determinant of channel length is the degree to which a retail system is ____.
A) concentrated
B) fragmented
C) decentralized
D) globalized
Q3) How do levels of economic development affect consumer behavior? What are the implications for marketing strategy?
Q4) What are the three factors that contribute to the trend toward greater retail concentration in developed countries? How have these factors promoted retail concentration?
Q5) What factors affect the rate of new-product development in countries?
Q6) What factors affect the success of a firm's international communications?
Page 20
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Chapter 19: Global Human Resource Management
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Q1) Firms may choose an ethnocentric approach to staffing as opposed to a polycentric approach because of the cost savings it promotes.
A)True
B)False
Q2) The international trade secretariats (ITS)have had virtually no real success.Which of the following is NOT a cause of the ITS's ineffectiveness?
A) National unions compete with each other to attract investment from international businesses.
B) The structure and ideology of unions tend to vary significantly from country to country.
C) Organized labor has had only limited success in its efforts to get national and international bodies to regulate multinationals.
D) The codes of conduct developed by International Labor Organization and the Organization for Economic Cooperation and Development prevented the ITSs from exercising absolute power.
Q3) What are the advantages of the geocentric staffing policy?
Q4) Discuss the advantages and disadvantages of a polycentric approach to staffing.
Q5) What is expatriate failure?
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Chapter 20: Accounting and Finance in the International Business
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Q1) The principles of multilateral netting and bilateral netting are different.
A)True
B)False
Q2) The connection between cash flows to the parent and the source of financing must be recognized when performing capital budgeting for an international business.
A)True
B)False
Q3) Of the five combinations,Lessard and Lorange recommend that firms use the _____ spot exchange rate to translate both the budget and performance figures into the corporate currency.
A) ending
B) initial
C) final
D) projected
Q4) Accounting is shaped by the environment in which it operates.
A)True
B)False
Q5) What are the main steps in the control process of a typical firm?
Q6) Describe importance of accounting information in business.
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