International Business Law
Exam Answer Key
Course Introduction
International Business Law explores the legal frameworks and principles that govern business transactions and commercial relationships across national borders. The course covers key topics such as international trade regulations, contracts, dispute resolution mechanisms, intellectual property rights, and the impact of organizations like the World Trade Organization (WTO). Students will examine legal risks and strategies for managing legal issues in multinational operations, comparative law systems, and ethical considerations in global commerce. Through case studies and real-world scenarios, the course aims to develop an understanding of how legal environments influence business decision-making in the international marketplace.
Recommended Textbook
International Business The New Realities 3rd Edition by S. Tamer Cavusgil
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Chapter 1: Introduction: What Is International Business
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Sample Questions
Q1) Phillip Hardy, one of the potential investors, expresses the desire to purchase only those types of assets in which he can maintain a relatively short-term interest. Which of the following investment opportunities would be most suited for Mr. Hardy?
A) a venture that gives investors ownership of the equipment used by multiple South African mining companies
B) an initiative to purchase the technology assets of an Indian consulting firm
C) the Freehold Eastern Growth Fund, which purchases Eastern European growth stocks
D) the Freehold World Climb Project, which maintains partial ownership of an Australian hiking equipment production plant
Answer: C
Q2) Which of the following is subject to importing and exporting?
A) both finished products and intermediate goods
B) finished products but not intermediate goods
C) intermediate goods but not raw materials
D) raw materials and components, but not finished products
Answer: A
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Chapter 2: Globalization of Markets and the
Internationalization of the Firm
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Q1) The first phase of globalization was characterized by the ________.
A) rise of steel production
B) rise of SMEs
C) dominance of MNEs in the agricultural industry
D) growth of railroads
Answer: D
Q2) The relocation of manufacturing and other value-chain activities to cost-effective locations abroad is known as ________.
A) insourcing
B) cultural imperialism
C) contagion
D) offshoring
Answer: D
Q3) Environmental destruction diminishes as economies develop, at least in the long run.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Organizational Participants That Make
International Business Happen
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Q1) Which of the following is true with regard to MNEs?
A) MNEs are constrained by limited human resource.
B) Due to their smaller size, MNEs often target specialized products.
C) MNEs are more flexible than SMEs.
D) MNEs perform various business activities through a network of subsidiaries.
Answer: D
Q2) Logistics service providers, freight forwarders, and banks are examples of ________.
A) retailers
B) distribution channel intermediaries
C) focal firms
D) facilitators
Answer: D
Q3) Common carriers are firms that ________.
A) plan, manage, and implement all phases of a project on behalf of foreign governments
B) assist retailers in developing e-commerce based marketing systems
C) own the ships, trucks, and airplanes used to transport goods around the world
D) provide expert counsel to MNEs on the legal aspects of international business
Answer: C
Page 5
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Chapter 4: The Cultural Environment of International Business
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Sample Questions
Q1) Which of the following is true about language?
A) Language does not entail facial expressions and gestures.
B) National languages, dialects, and translation facilitate straightforward communication.
C) Language has both verbal and nonverbal characteristics.
D) Business jargons are common across cultures.
Q2) Which of the following is a cultural barrier inherent to service firms that internationalize via FDI?
A) Service firms are unable to infiltrate international markets due to language issues.
B) The source of a firm's funding determines the location of its international subsidiaries.
C) A firm's corporate culture is overly influenced by its national culture.
D) Firms that internationalize via FDI usually make large spending cuts on advertising campaigns.
Q3) Cross-cultural proficiency cannot be obtained from reading books or befriending natives in one's own country.
A)True
B)False
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Page 6
Chapter 5: Ethics and International Business
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Q1) Improper ethical behavior is unlikely to result when bad means are justified by good ends.
A)True
B)False
Q2) In the five-step framework for making ethical decisions, implementing a course of action implies ________.
A) assessing how effective the decision was
B) reviewing any proposed action to ensure it is acceptable according to company policy and the firm's code of conduct
C) determining the nature and dimensions of the ethical problem
D) creating new rules, processes, or procedures, and putting these into effect
Q3) The five approaches to analyzing ethical dilemmas often lead to similar solutions.
A)True
B)False
Q4) ________ is the top market for counterfeit and pirated goods.
A) China
B) The United States
C) Iran
D) Russia
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Chapter 6: Theories of International Trade and Investment
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Q1) In a short essay, explain the absolute advantage principle. Provide an example of the principle at work.
Q2) Which of the following benefits would Earth-Rite most likely accrue if it entered into a joint venture with the Brazilian grocery store chain?
A) Earth Rite would experience high employee turnover in the home country.
B) Earth Rite would be able to eliminate competition in the foreign markets.
C) Earth Rite would be able to completely eliminate the risk of proprietary knowledge infringement abroad.
D) Earth Rite would have access to the foreign partners' know-how.
Q3) According to the absolute advantage principle, national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports.
A)True
B)False
Q4) According to the internationalization process model, internationalization takes place in incremental stages over a long time.
A)True
B)False
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Chapter 7: Political and Legal Systems in National Environments
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Q1) Which of the following questions would be more important for Zane legal experts to consider before recommending Country A or Country B?
A) Have other corporations based in these two countries been profitable?
B) What is the prevalence of industrial crime in these two countries?
C) How would a contractual dispute with a local vendor be resolved?
D) Would local environmental organizations target Zane for its manufacturing practices?
Q2) What is transparency? Explain how transparency varies around the world.
Q3) The three major types of current political systems are ________.
A) totalitarianism, socialism, and democracy
B) socialism, democracy, and monarchy
C) totalitarianism, liberalism, and fascism
D) democracy, republicanism, and oligarchy
Q4) Which of the following is characteristic of an effective legal system?
A) a stable and rigid framework of rules and norms across nations
B) systematically enforced laws and regulations
C) political involvement in business transactions
D) universal emphasis on religious law over common and civil law
Q5) What are some of the risks and benefits for firms involved with international e-commerce?
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Chapter 8: Government Intervention in International Business
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Q1) Patrick's research is most likely to indicate the ________ as the reason for the rapid economic growth achieved by Singapore, Hong Kong, and Taiwan from the 1970s onward.
A) development of export-intensive industries
B) expansion of import-driven industries
C) chiefly monopolistic nature of the markets
D) rise of subsidized industries
Q2) The so-called ________ specifies that a certain proportion of products and supplies, or of intermediate goods used in local manufacturing, must be produced within the bloc.
A) safe harbor
B) local content requirement
C) rules of origin requirement
D) ad valorem tariff
Q3) Governments impose defensive barriers to ________.
A) generate tax revenues
B) increase employment
C) pursue strategic policy objectives
D) promote national security
Q4) In a short essay, explain how the GATT changed international trade.
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Chapter 9: Regional Economic Integration
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Q1) Slow progress in liberalizing trade, especially for agricultural products, has prompted many developing countries to seek alternatives to the global trading system favored by the WTO.
A)True
B)False
Q2) Members of ________ agree to adopt common tariffs and non-tariff barriers that are applied to imports from nonmember countries.
A) free trade areas
B) customs unions
C) the NAFTA
D) the EFTA
Q3) Which of the following helps foster economic integration on a global scale?
A) WTO
B) EU
C) NATO
D) UN
Q4) The level of integration of a political union is the highest.
A)True
B)False
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Chapter 10: Understanding Emerging Markets
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Q1) ________ in developing economies deter firms from these countries from participating in the global economy.
A) Low trade volumes
B) Bureaucracy and red tape
C) High inward FDI
D) Lack of a rich cultural heritage
Q2) Businesses foster economic development in emerging markets ________.
A) through the mass production of cheap, low-quality goods
B) by using the "cookie cutter" strategy
C) through entrepreneurial activities and modernization projects
D) by implementing cost-effective production methods
Q3) Emerging markets act as manufacturing bases for global MNEs because of
A) high regulations
B) high availability of low-wage ,highly skilled labor
C) well-developed infrastructure
D) strong intellectual property laws
Q4) MNEs must set high prices in emerging markets because emerging market consumers have high spending power.
A)True
B)False
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Chapter 11: The International Monetary and Financial Environment
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Q1) Which of the following is a characteristic of momentum trading?
A) Investors buy stocks as prices fall.
B) Investors sell stocks when others sell.
C) Investors buy stocks as prices rise.
D) Investors buy and sell stocks spontaneously.
Q2) The foreign-exchange market is located exclusively in the United States.
A)True
B)False
Q3) If last year one dollar equaled one euro, and then the exchange rate shifted so that today one dollar equals two euros, which of the following would most likely NOT occur?
A) European firms would pay more for raw materials imported from the United States.
B) European consumers would purchase fewer U.S. products and services.
C) Fewer Europeans would travel to the U.S. or study at U.S. universities.
D) European firms would lower their prices on goods made with U.S. parts.
Q4) Describe the role of commercial banks in the global financial sector. Provide a brief description of the activities performed by three different types of commercial banks.
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Page 13
Chapter 12: Strategy and Organization in the International Firm
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Q1) Discuss the advantages and implementation of a transnational strategy, and explain why this strategy is closely associated with a global matrix structure.
Q2) Companies that proactively build a global organizational culture subscribe to subjective ethical and moral standards.
A)True
B)False
Q3) Explain the benefits of a multidomestic strategy to firm internationalization. What are some of the disadvantages to this approach?
Q4) Which of the following is an example of a multidomestic industry?
A) chemicals
B) telecommunications
C) fashion
D) aerospace
Q5) Geographic area structure is an organizational design in which management and control are decentralized to the level of individual geographic regions.
A)True
B)False
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Chapter 13: Global Market Opportunity Assessment
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Sample Questions
Q1) ________ refer to cross-border business alliance whereby partnering firms pool their resources and share costs and risks to undertake a new business venture.
A) International collaborative ventures
B) Turnkey operations
C) Greenfield investments
D) Acquisitions
Q2) As long as a firm is confident of its product being sold, it does not need to analyze who initiates the purchase.
A)True
B)False
Q3) When assessing the firm's readiness to internationalize, managers peer into their organization to determine the degree to which it has the resources necessary to successfully engage in international business.
A)True
B)False
Q4) Describe the variables used to identify the best markets for FDI entry. Which countries are popular for FDI entry? Why are they popular?
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Page 15
Chapter 14: Exporting and Countertrade
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Q1) Which of the following statements is true about managing export-import transactions?
A) The commercial invoice is the basic contract between exporter and shipper.
B) National governments sometimes require exporters to obtain license due to national security policy.
C) Incoterms is the "birth certificate" of the goods being shipped and indicates the country of origin.
D) Export declaration lists a set of universally accepted terms of sale that specify how the buyer and seller share freight and insurance costs.
Q2) A risk-averse manager at a Canadian firm would most likely pursue initial internationalization in ________.
A) the United States
B) China
C) India
D) Russia
Q3) In a short essay, describe how intermediaries facilitate indirect exporting and direct exporting, and explain why international managers go to great lengths to build relational assets with their key intermediaries.
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16
Chapter 15: Foreign Direct Investment and Collaborative Ventures
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Q1) Which of the following is a characteristic of project-based, non-equity ventures?
A) a broad scope of product development
B) a specific agenda and timeframe
C) long-term sharing of resources
D) formation of a new legal entity
Q2) Which of the following is a trend seen in the modern international economy?
A) Firms from both advanced and emerging economies employ FDI.
B) Emerging markets are the sole recipient countries for FDI.
C) Companies primarily use acquisitions to enter foreign markets.
D) Firms in the service sector use e-commerce exclusively to enter foreign markets.
Q3) While franchising facilitates rapid internationalization, compared to FDI, it affords the firm less control over its foreign operations.
A)True
B)False
Q4) Discuss the four key differences between project-based, nonequity ventures and equity ventures.
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Chapter 16: Licensing, Franchising, and Other Contractual Strategies
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Q1) Which of the following most likely supports Azoo government's decision to award the project bid to Contractor A?
A) Azoo leaders want immediate ownership of the public projects.
B) Azoo leaders want long-term help with operation of the subway.
C) Azoo lacks qualified workers to maintain public works projects.
D) Azoo lacks the financial resources to purchase large machinery.
Q2) One of the disadvantages of licensing is that it requires the licensor to make a high capital investment in the foreign market.
A)True
B)False
Q3) Describe three challenges faced by professional service firms when they internationalize.
Q4) In a system franchising agreement, the franchisor provides ________.
A) down-payment plus royalty
B) production and marketing methods
C) lump-sum payment
D) sale of related products
Q5) Describe six unique qualities shared by all cross-border contractual relationships.
Page 18
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Chapter 17: Global Sourcing
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Q1) An American company that planned to outsource IT development would be most likely to save significantly in salary costs by hiring qualified professionals from
A) Hong Kong
B) Philippines
C) the United States of America
D) Germany
Q2) What role do logistics play in global sourcing? In a short essay, discuss how logistics relates to cost. Provide an example of a firm that lost money as a result of inadequate logistics.
Q3) All business activities and processes lend themselves to global sourcing.
A)True
B)False
Q4) In a short essay, explain how global sourcing can affect home-country employees.
Q5) As a strategic asset, manufacturing of products is of high importance to a firm.
A)True
B)False
Q6) How can managers best resolve tension among employees on account of global sourcing?
Q7) Discuss the major risks associated with global sourcing.
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Chapter 18: Marketing in the Global Firm
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Q1) In which of the following industries is an adaptation strategy LEAST likely to be appropriate?
A) consumer electronics
B) publishing
C) software
D) television broadcasting
Q2) A reputed American automaker competes in the premium car market segment. It targets affluent buyers with refined tastes who would not mind paying several thousand dollars for a premium car. This is an example of positioning.
A)True
B)False
Q3) When managers attempt to standardize their international marketing program, they can expect ________.
A) diminished efficiency
B) cost reduction
C) brand dilution
D) very high profit margins
Q4) What is global account management? Briefly describe the role of global account management in international business.
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Chapter 19: Human Resource Management in the Global Firm
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Q1) How can international human resource managers effectively minimize culture shock for expatriates?
A) by allowing personnel a short trip to the foreign location before the actual assignment
B) by training personnel to understand the host country's government, culture, and language
C) by inviting foreign employees to the homes of future expatriates for enhancing cultural awareness
D) by asking the expatriate to return to the headquarters
Q2) Which of the following best describes an expatriate?
A) an employee who is assigned to live and work in a foreign country for an extended period
B) an employee who returns to his home country after a foreign assignment
C) an employee hired on a temporary basis by an MNE
D) an employee who is a host-country national
Q3) All of the following refer to key tasks of IHRM EXCEPT ________.
A) developing global managers
B) assessing job performance of expatriates
C) evaluating internal accounting practices and audits
D) handling labor disputes and strikes
Page 21
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Chapter 20: Financial Management and Accounting in the Global Firm
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Q1) The last task in international financial management is to manage the diversity of international accounting and tax practices.
A)True
B)False
Q2) Economic exposure results from exchange-rate fluctuations that affect ________.
A) marketing strategies
B) tariffs and duties
C) brand personality
D) product pricing
Q3) The mix of long-term equity financing and debt financing that firms use to support their international activities is known as ________.
A) multilateral netting
B) controlling interest
C) capital structure
D) transaction exposure
Q4) Explain the differences between equity financing and debt financing, and discuss the ways international firms obtain equity financing or debt financing.
Q5) How has technology affected foreign exchange trading?
Page 22
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