International Business Law
Pre-Test Questions
Course Introduction
International Business Law examines the legal principles and frameworks that govern commercial transactions and business relationships across national borders. The course explores key topics such as international trade law, dispute resolution, contract negotiation, intellectual property protection, and regulatory compliance within a global context. Students will develop an understanding of the major international legal institutions, such as the World Trade Organization, and learn how legal and ethical considerations impact business operations in different jurisdictions. Practical case studies and current issues are integrated to help students critically assess the complexities of conducting business internationally.
Recommended Textbook
International Business 15th Edition by John Daniels
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Page 2
Chapter 1: Globalization and International Business
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Q1) The process of shifting production to a foreign country is known as outsourcing.
A)True
B)False
Answer: False
Q2) Which term refers to two or more companies that share ownership of an FDI?
A) turnkey operation
B) transnational firm
C) joint venture
D) franchise Answer: C
Q3) Many companies merge with or acquire other companies to gain operating efficiencies that help them compete with or become global leaders.
A)True
B)False
Answer: True
Q4) International business includes all commercial transactions between two or more countries.
A)True
B)False
Answer: True
Page 3
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Chapter 2: The Cultural Environments Facing Business
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Q1) The approach a company takes when it bases foreign operations on an informed knowledge of its organizational culture along with home- and host-country needs,capabilities,and constraints is called ________.
A) polycentrism
B) ethnocentrism
C) neocentrism
D) geocentrism
Answer: D
Q2) Assume a firm has operations in Tokyo,where there is a collectivist culture.Which of the following would most likely motivate the firm's Japanese employees?
A) "employee-of-the-month" programs
B) extensive vacation time
C) on-the-job challenges
D) good health benefits
Answer: D
Q3) Cultural change may come by choice or imposition.
A)True
B)False
Answer: True
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Page 4
Chapter 3: The Political and Legal Environments Facing Business
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Q1) What is procedural political risk? How does a nation's political and legal environment influence procedural risk for MNEs?
Answer: Procedural risk is associated with moving people,products,and funds from point to point in the global market.Each move creates a procedural transaction between companies or countries.Political actions sometimes impose frictions that slow or stop transactions.The repercussions of,say,public fraud or a partisan judicial system can raise business costs; corrupt officials,for instance,might pressure a foreign firm to pay additional monies to clear goods through customs or obtain a permit to open a factory.Politically motivated interference escalates expenses,thereby lowering returns.Procedural political risk is often classified as a micro risk-that is,it affects some but not all companies.
Q2) Which of the following statements best describes a pluralistic society?
A) Multiple segments of society adhere to the same political philosophy.
B) Two dominant political parties rule local and federal governments.
C) Different ideologies are held by different segments of society.
D) Various ethnic groups belong to the official political party.
Answer: C
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Page 5
Chapter 4: The Economic Environments Facing Businesses
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Q1) In most cases,governments ________ in order to regulate inflation.
A) lower interest rates
B) increase taxes
C) raise interest rates
D) decrease taxes
Q2) Communism primarily relies on a system of ________.
A) private business ownership
B) competitive pricing and marketing
C) market-generated supply and demand
D) government controlled economic activity
Q3) Presently,which of the following countries is best characterized as a pure example of a command economy?
A) Russia
B) North Korea
C) China
D) Vietnam
Q4) What is meant by the idea of economic freedom? What factors are used in the Economic Freedom Index? For managers,what role does the Economic Freedom Index play in analyzing the potential of a country?
Q5) What is the difference between a command economy and state capitalism?
Page 6
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Chapter 5: International Trade and Factor-Mobility Theory
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Q1) Costa Rica's recent economic transformation to depend more on high-tech manufacturing is largely due to its adoption of ________ trade policy.
A) an import substitution
B) a comparative advantage
C) a factor proportions
D) a strategic
Q2) Under mercantilism,governments sought to influence trade by ________.
A) establishing bilateral trading agreements with other countries
B) limiting exports
C) limiting imports and subsidizing exports
D) encouraging the development of manufacturing in their colonies
Q3) What is the theory of country size? How is country size determined? How does country size affect national trade patterns?
Q4) The four favorable domestic conditions of the diamond of national advantage help to explain how and where globally competitive companies develop and sustain themselves.
A)True
B)False
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Chapter 6: Governmental Influence on Trade
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Q1) Assume a government is considering import restrictions on sugar because sugar imports are hurting the domestic industry.Which of the following groups is LEAST likely to speak out on the subject?
A) politicians in areas that grow sugar
B) employees of sugar companies
C) sugar company owners
D) sugar consumers
Q2) Unemployed workers are most apt to form a pressure group to support ________.
A) export restrictions
B) import restrictions
C) price limitations
D) import subsidies
Q3) Which of the following is NOT causing greater complexity in the regulation of trade?
A) growth in export tariffs
B) services available over the Internet
C) heightened concern about product safety
D) development of new products that must be classified
Q4) Explain the rationale for and problems with making the infant-industry argument work as intended.
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Chapter 7: Cross-National Cooperation and Agreements
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Q1) The Single European Act set steps to accomplish monetary union in the European Union,including the creation of the euro.
A)True
B)False
Q2) Trade shifting to countries within a regional trade agreement at the expense of trade with countries not in the agreement is called ________.
A) a dynamic effect
B) trade creation
C) trade diversion
D) economy of scale
Q3) ________ effects of economic integration are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.
A) Dynamic
B) Static
C) Economic
D) Barrier
Q4) Are commodity agreements effective? Why or why not?
Q5) What are the rules of origin and regional content provisions of NAFTA?
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Chapter 8: Global Foreign-Exchange Markets
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Q1) The relationship between the value of the Brazilian and Chinese currencies is known as the ________.
A) stock price
B) exchange rate
C) foreign-exchange market
D) purchasing power parity
Q2) The ________ is the most widely traded currency in the world.
A) pound
B) yen
C) euro
D) U.S. dollar
Q3) An offer is the right but not the obligation to buy or sell foreign currency.
A)True
B)False
Q4) According to 2010 surveys,the most frequently traded currency pair is the U.S.dollar and Japanese yen.
A)True
B)False
Q5) What are the characteristics of the spot market? What institutions handle spot exchanges?
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Chapter 9: The Determination of Exchange Rates
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Q1) According to purchasing power parity theory,if Brazilian inflation was 6 percent and inflation in Argentina was 12 percent,the Brazilian real would be expected to ________.
A) rise by the difference in inflation rates
B) fall by the difference in inflation rates
C) rise by 4.5 percent
D) stay the same
Q2) According to the text,which currency is expected to experience the most change in the upcoming years?
A) yen
B) yuan
C) euro
D) U.S. dollar
Q3) Forecasters must predict the magnitude,direction,and ________ of an exchange rate change or movement.
A) length
B) timing
C) altitude
D) depth
Q4) What is a Special Drawing Right (SDR)? How is it used?
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Chapter 10: Global Capital Markets
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Q1) The typical tax-haven subsidiary owns the common stock of its related operating foreign subsidiaries.
A)True
B)False
Q2) A bond that is issued by Nestle,a Swiss company,which is denominated in yen and sold to residents of Japan is most likely a ________.
A) Eurobond
B) global bond
C) foreign bond
D) country fund
Q3) An ADR is a negotiable certificate issued by a U.S.bank in the United States to represent the underlying shares of a foreign corporation's stock held at a custodian bank in the foreign country.
A)True
B)False
Q4) The dominant currencies in the international bond market are the euro and the U.S.dollar.
A)True
B)False
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Chapter 11: Globalization and Society
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Q1) The creation of a code of conduct includes steps such as establishing a global policy,communicating the code to employees,ensuring that the policies are followed,and reporting results to external stakeholders.
A)True
B)False
Q2) Which of the following statements is most likely true about the postconventional level of moral development?
A) Individuals learn what is moral but not why such behavior is moral.
B) Individuals behave morally because they fear negative repercussions.
C) Individuals learn how to conform to society's values through observation.
D) Individuals behave morally because they believe such actions are right.
Q3) A guideline for responsible action by a firm in its operations worldwide is a(n)________.
A) code of conduct
B) corporate monitoring policy
C) education program
D) honor code
Q4) What is the Foreign Corrupt Practices Act? How has this law affected ethical behavior among international businesses?
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Chapter 12: The Strategy of International Business
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Q1) Political,legal,economic,monetary,and institutional forces comprise the ________ of international business and influence managers' actions.
A) environment
B) competition
C) culture
D) threat
Q2) A distinct advantage of an international strategy is ________.
A) transferring core competencies to foreign markets
B) reaping benefits of global learning
C) customizing product offerings to local conditions
D) leveraging local managers' knowledge of their markets
Q3) Micro-multinationals are firms that globalize immediately and enter countries with numerous customers,productive workers,and attractive industries.
A)True
B)False
Q4) When different companies produce the same commodity,their costs are essentially the same.
A)True
B)False
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Chapter 13: Country Evaluation and Selection
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Q1) Dawson Manufacturing produces and sells DVD players and is planning to expand sales internationally.Dawson has narrowed down the list of potential countries to India and Guatemala.A Dawson manager has the task of obtaining data regarding the number of DVD players sold annually in India and Guatemala.If unable to locate this information,she might most likely estimate the sales potential of these two countries by
A) determining average wages
B) calculating future inflation rates
C) reviewing the countries' dependence on steel imports
D) examining the sales history of flat-screen televisions
Q2) Elison Enterprises is planning international geographic expansion.A manager at Elison has been given the task of scanning for locations primarily to ________.
A) reduce the number of options available to a manageable number for further detailed analysis
B) assure the compatibility between the mode of corporate operation and the country
C) assure that all countries within a region have similar investment climates
D) decide whether to use a concentration or a diversification strategy
Q3) What is scanning? What opportunities and risks are most relevant to scanning?
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Chapter 14: Export and Import
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Questions
Q1) Major types of indirect intermediaries include export trading companies,distributors,and freight forwarding companies.
A)True
B)False
Q2) Why is countertrade considered inefficient?
Q3) Indirect exporters sell goods to a foreign intermediary,who then sells the product in the domestic market to the final consumer.
A)True
B)False
Q4) The Internet supports more companies' efforts to launch a direct exporting strategy by ________.
A) providing information quickly and inexpensively
B) eliminating the need for highly detailed export plans
C) letting software take over customer service responsibilities
D) countering the power of electronic data interchange systems
Q5) Serendipity is often an export trigger for companies that purposefully look to internationalize their operations.
A)True
B)False
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Chapter 15: Direct Investment and Collaborative Strategies
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Q1) When a company's primary motive for entering a collaborative arrangement is to learn from its partner,it is likely to ________.
A) leave control to its partner
B) "go it alone" after it has learned what it needs to know
C) have disagreements with the partner over quality issues
D) prefer the arrangement to be a licensing agreement
Q2) Appropriability theory refers to ________.
A) denying rivals access to competitive resources such as management know-how
B) categorizing the appropriateness of a firm's foreign investments in terms of host country objectives
C) explaining an investing firm's choice of partner in a joint venture
D) predicting the general pattern of direct investment locations
Q3) The more a company engages in international collaborative arrangements as opposed to wholly owned foreign operations,the more it is likely to ________.
A) decrease its exposure to political risk
B) increase its control over foreign operations
C) learn rapidly about foreign environments
D) protect its core assets
Q4) Explain how franchising agreements differ from licensing agreements.
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Chapter 16: The Organization of International Business
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Q1) The balance between centralization and decentralization of authority in a company is known as ________.
A) systemic differentiation
B) horizontal differentiation
C) schematic differentiation
D) vertical differentiation
Q2) Whereas executives specify roles and relationships in a functional structure in terms of ________,they use the divisional structure format to specify them according to
A) inputs; outputs
B) buyers; suppliers
C) markets; countries
D) politics; economics
Q3) Which of the following is the most likely benefit of a network structure?
A) encouraging competition among members for resources
B) facilitating supplier changes anywhere in the value chain
C) developing core competencies in a broad range of value activities
D) maintaining a strong sense of organization in the face of dynamic partnerships
Q4) Describe how an MNE might use reports as a control mechanism.
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Chapter 17: Marketing Globally
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Q1) A push strategy for international sales is most likely preferable to a pull strategy when ________.
A) there are few prohibitions on advertising
B) the price of the product is high relative to incomes
C) people rely on friends' opinions before buying a product
D) literacy rates are high
Q2) When selling a commodity for which there is little possibility of product differentiation,a company would likely use which of the following orientations internationally?
A) customer orientation
B) production orientation
C) sales orientation
D) strategic marketing orientation
Q3) Arden Shoes runs a different marketing campaign every four weeks abroad.Which of the following best describes the advantage of doing so?
A) It enables Arden to attract more sales personnel.
B) It helps Arden create an image of having quality products.
C) It allows Arden to change prices in highly inflationary economies.
D) It enables Arden to switch quickly and inexpensively to a local emphasis.
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Chapter 18: Global Manufacturing and Supply-Chain Management
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Q1) The manufacturing plants of Orion Computers are located closer to customers rather than in low-wage areas.What is the most likely reason for this strategy?
A) competitor locations in emerging markets
B) overseas producers with innovative designs
C) customer demand for dependability
D) diversification of product lines
Q2) A ________ takes into account the complete costs of ownership,such as storing and transporting inventory,and of disposal.
A) total cost analysis
B) cost-benefit analysis
C) make-or-buy decision
D) flexibility strategy
Q3) Quality is defined as ________.
A) meeting or exceeding the expectations of the customer
B) meeting the everyday low price expected by the customer
C) meeting international quality standards, such as ISO 9000
D) meeting internal quality standards
Q4) Why are the concepts of dependability and quality important when developing a global manufacturing strategy?
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Chapter 19: International Accounting and Finance Issues
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Q1) According to the accounting concept of mutual recognition,________.
A) companies are required to reconcile financial statements to local GAAP
B) a country would accept financial statements of foreign companies prepared according to the GAAP of the foreign country if a company wanted to list its shares on that country's stock exchange
C) companies would have to mutually agree to use GAAP issued by the IASB
D) companies would have to recast their financial statements in terms of local GAAP
Q2) Using the same exchange rate to set the budget and monitor results ________.
A) allows management to focus on operating variances instead of exchange-rate variances
B) enables management to focus on both operating and exchange-rate variances
C) is an illegal reporting method according to the FASB
D) is the only method that can be used in Europe
Q3) Explain the difference between macro-uniform-based and micro-based accounting systems.What are some examples of countries that fit in each system?
Q4) How do exchange rates affect budgets used to evaluate performance in MNEs?
Q5) How do cultural values such as optimism,conservatism,transparency,and secrecy affect country differences in accounting systems?
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Chapter 20: International Human Resource Management
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Q1) What are the current trends in expatriate allowances? What are the reasons for these changes?
Q2) Advantages of adopting a polycentric approach include which of the following?
A) capitalizing on the availability of qualified local managers
B) helping transfer core competencies from the home nation to local subsidiaries
C) increasing the international career mobility for local managers
D) offsetting tendencies for the company to adapt excessively to the local market
Q3) A geocentric staffing policy seeks the best qualified people for key jobs throughout the organization,irrespective of their nationality.
A)True
B)False
Q4) An example of a third-country national is a ________.
A) dual citizen (Canadian and U.S. citizenship) working for a Mexican company in Mexico
B) Canadian citizen working for a U.S. company in Canada
C) U.S. citizen working for a U.S. company in Canada
D) Canadian citizen working for a U.S. company in Mexico
Q5) List and discuss the main components of an expatriate's compensation package.
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