International Economics
Exam Answer Key
Course Introduction
International Economics explores the flow of goods, services, and capital across national borders, examining the theories and policies that shape global trade and finance. The course covers key topics such as comparative advantage, balance of payments, exchange rate systems, trade policy instruments, and the impact of globalization on economic growth and inequality. Students will analyze real-world case studies and current events to understand the interplay between domestic economic policies and international economic relations, equipping them with analytical tools to assess challenges and opportunities in the global economy.
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International Business Competing in the Global Marketplace 8th Edition by Charles
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Page 2
W. L. Hill
Chapter 1: Globalization
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Q1) Technological innovations have facilitated all of the following except:
A)globalization of production.
B)globalization of markets.
C)creation of electronic global marketplaces.
D)creation of absolutely homogeneous consumer markets.
Answer: D
Q2) In the period 1950-1990,the world GDP showed a consistent decline as opposed to the volume of exports.
A)True
B)False
Answer: True
Q3) With the help of an example discuss the characteristics of globalization.
Answer: Globalization refers to a fundamental shift in the world economy in which national economies are no longer relatively self-contained entities.Instead,nations are moving toward an interdependent global economic system.Within this new global economy,an American might drive to work in a car designed in Germany that was assembled in Mexico by DaimlerChrysler from components made in the U.S.and Japan that were fabricated from Korean steel and Malaysian rubber.A company does not have to be the size of these multinational giants to facilitate,and benefit from,the globalization of markets.
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Chapter 2: National Differences in Political Economy
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Q1) The benefits of doing business in a country are a function of all of the following except:
A)the size of the market.
B)its past growth.
C)its present wealth.
D)its future growth prospects.
Answer: B
Q2) Which of the following provides exclusive legal rights to authors,composers,playwrights,artists,and publishers to publish and disperse their work as they see fit?
A)Patents
B)Copyrights
C)Trademarks
D)Licenses
Answer: B
Q3) The general assertion that nations that invest more in education will have higher growth rates has been proved false.
A)True
B)False
Answer: False
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Chapter 3: Differences in Culture
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Q1) The belief in the superiority of one's own culture is known as:
A)ethnocentrism.
B)egocentrism.
C)polycentrism.
D)theocentricism.
Answer: A
Q2) The emphasis on individualism in the United States may raise the costs of doing business due to its adverse impact on managerial stability and cooperation.
A)True
B)False
Answer: True
Q3) This is a less rigid form of social stratification in which social mobility is possible.
A)Social system
B)Caste system
C)Cultural system
D)Class system
Answer: D
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Chapter 4: Ethics in International Business
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Q1) Should a multinational feel free to pollute in a developing nation?
Q2) Employees in a business often take their cue from business leaders,and if those leaders do not behave in an ethical manner,they might not either.
A)True
B)False
Q3) What are the determinants of ethical behavior?
Q4) What is the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?
Q5) How does the righteous moralist approach business ethics? Who is likely to favor this approach?
Q6) An advantage of utilitarianism is that the philosophy allows for the consideration of justice.
A)True
B)False
Q7) It typically is fairly easy to measure the benefits,costs,and risks of a course of action.
A)True
B)False
Q8) What is the Foreign Corrupt Practices Act? What is its purpose?
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Chapter 5: International Trade Theory
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Q1) The simple comparative advantage model assumes that trade does not change a country's stock of resources or their utilization efficiency.If we relax this assumption to make allowances for dynamic changes,all of the following become apparent except:
A)opening the economy to trade would be likely to generate dynamic gains.
B)free trade may increase the country's stock of resources.
C)free trade might increase the efficiency with which the country uses its resources.
D)dynamic gains will cause the country's PPF to shift inward.
Q2) According to the _____ model,when a rich country enters into a free trade agreement with a poor country that rapidly experiences dynamic gains,the rich country is likely to not have net gains.
A)absolute advantage
B)mercantilist
C)Heckscher-Ohlin
D)Samuelson
Q3) Explain the connections between economies of scale,first-mover advantages,and trade patterns.
Q4) What are the benefits of free trade?
Q5) What is the Leontief paradox?
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Chapter 6: The Political Economy of International Trade
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Q1) The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price disadvantage.
A)True
B)False
Q2) The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.
A)True
B)False
Q3) Tariffs are unambiguously pro-consumer and anti-producer.
A)True
B)False
Q4) Inadequate protections for intellectual property reduce the incentive for innovation.
A)True
B)False
Q5) Discuss the establishment of GATT.What was GATT's objective?
Q6) Compare and contrast import quotas and voluntary export restraints.
Q7) What are the central issues facing the WTO at the present time?
Page 8
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Chapter 7: Foreign Direct Investment
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Q1) An oligopoly is an industry composed of a limited number of large firms.
A)True
B)False
Q2) Discuss the benefits and costs of FDI from the perspective of a host country and from the perspective of the home country.
Q3) Host governments sometimes worry that the subsidiaries of foreign MNEs may have greater economic power than indigenous competitors.
A)True
B)False
Q4) When two or more enterprises encounter each other in different regional markets,national markets,or industries,there is:
A)vertical integration.
B)horizontal integration.
C)multipoint competition.
D)monopolistic competition.
Q5) Countries cannot prohibit national firms from investing in certain countries for political reasons.
A)True
B)False
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Chapter 8: Regional Economic Integration
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Q1) In a customs union,trade barriers are eliminated among member countries,and each country maintains its own external trade polices with nonmember countries.
A)True
B)False
Q2) Once barriers to trade and investment are removed,companies can treat a group of integrated countries as a single market and produce standardized products for it.
A)True
B)False
Q3) 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
Q4) On January 1,1993,_____ moved toward a single market with 340 million consumers.
A)the European Union
B)MERCOSUR
C)the Andean community
D)NAFTA
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Chapter 9: The Foreign Exchange Market
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Q1) According to the law of one price,at the most basic level,exchange rates are determined by supply and demand.
A)True
B)False
Q2) The foreign exchange market is a global network of banks,brokers,and foreign exchange dealers connected by electronic communications systems.
A)True
B)False
Q3) Compare and contrast currencies that are freely convertible,externally convertible,and nonconvertible.
Q4) _____ draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.
A)Efficient market theory
B)Inefficient market theory
C)Fundamental analysis
D)Technical analysis
Q5) The foreign exchange market is open for only 12 hours in a day.
A)True
B)False
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Chapter 10: The International Monetary System
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Q1) Evidence shows that adopting a pegged exchange rate regime increases inflationary pressures in a country.
A)True
B)False
Q2) A pure free float is one in which exchange rates are determined by market forces.
A)True
B)False
Q3) When a country pegs its currencies to gold and guarantees convertibility,the country is following the:
A)gold standard.
B)Bretton Woods system.
C)fixed exchange system.
D)floating exchange rate system.
Q4) In 2007,about a quarter of the IMF's members had an exchange rate policy that allowed their currency to float freely.
A)True
B)False
Q5) Consider the case for fixed exchange rates.
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Chapter 11: The Global Capital Market
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Q1) _____ position themselves to make "long bets" on assets that they think will increase in value,and "short bets" on assets that they think will decline in value.
A)Growth funds
B)Arbitrageurs
C)Hedge funds
D)Debt funds
Q2) When an investor purchases a corporate stock,he purchases the right to receive a specified fixed stream of income from the corporation for a specified number of years.
A)True
B)False
Q3) The larger pool of investors in an international market implies that borrowers will be able to pay more.
A)True
B)False
Q4) What are the financial advantages that make the eurocurrency market attractive to both depositors and borrowers?
Q5) What is a eurocurrency?
Q6) What is systematic risk?
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Chapter 12: The Strategy of International Business
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Q1) The marketing and sales functions of a firm can help to create value through all of the following ways,except:
A)creating goods and services.
B)brand positioning.
C)advertising.
D)communicating consumer needs to R&D.
Q2) Consider the firm in terms of a value chain.What is the difference between primary activities and support activities? Provide examples of each.
Q3) Economies that arise from performing a value creation activity in the optimal location are known as location economies.
A)True
B)False
Q4) The strategy,operations,and organization of a firm must all be consistent with each other if the firm is to attain a competitive advantage and achieve superior profitability.
A)True
B)False
Q5) How can a firm increase its profitability?
Q6) What is strategy? How does strategy relate to a firm's profitability?
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Chapter 13: The Organization of International Business
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Q1) Organizational structure means all of the following,except:
A)the establishment of integrating mechanisms to coordinate the activities of subunits.
B)the location of decision-making responsibilities with a structure.
C)the manner in which decisions are made and work is performed by individuals.
D)the formal division of the organization into subunits such as product divisions and functions.
Q2) In the classic global matrix structure,horizontal differentiation proceeds along two dimensions.These dimensions are:
A)hierarchy and overall strategy.
B)target returns and sales potential.
C)marketing strategy and sales potential.
D)product division and geographic area.
Q3) What are the two conditions with regard to firm architecture and strategy that are necessary for a firm to succeed?
Q4) It is more important to have a common culture in firms employing a localization strategy than a transnational strategy.
A)True
B)False
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Chapter 14: Entry Strategy and Strategic Alliances
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Q1) Which of the following is a distinct advantage of exporting?
A)It avoids the often substantial costs of establishing manufacturing operations in the host country.
B)Benefits from a local partner's knowledge of the host country's competitive conditions.
C)Avoids the threat of tariff barriers by the host-country government.
D)Appropriate if lower cost locations for manufacturing the product can be found abroad.
Q2) When a company has some intangible property that might have business applications,but the firm does not want to develop those applications itself,_____ makes sense.
A)exporting
B)a turnkey project
C)licensing
D)a wholly owned subsidiary
Q3) Which of the following statements about franchising is true?
A)It guarantees consistent product quality.
B)It tends to involve more short-term commitments than licensing.
C)It is a specialized form of licensing.
D)It is employed primarily by manufacturing firms.
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Chapter 15: Exporting,Importing,and Countertrade
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Q1) Which of the following is true of exporting?
A)It helps firm achieve economies of scale
B)It creates diseconomies of scale
C)It increases unit costs
D)It creates diseconomies of scope
Q2) Large revenue and profit opportunities are typically available in foreign markets.
A)True
B)False
Q3) Time drafts are negotiable instruments.
A)True
B)False
Q4) A draft:
A)is a document requesting payment.
B)is the same as a letter of credit.
C)is a reciprocal buying agreement.
D)gives title to shipped goods.
Q5) Compare and contrast counterpurchase agreements and offset arrangements.Why might an exporter prefer an offset to a counterpurchase deal?
Q6) Consider the incidence of countertrade.Where is it most common?
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Chapter 16: Global Production, Outsourcing, and Logistics
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Q1) The firm that improves quality control will also reduce its costs of value creation.
A)True
B)False
Q2) Under a JIT system,products are briefly warehoused before entering the manufacturing process.
A)True
B)False
Q3) Explain how the role of foreign factories evolves over time.
Q4) Mass customization describes the ability of companies to use flexible manufacturing technology to reconcile low cost and product customization.
A)True
B)False
Q5) What is mass customization?
Q6) Lean production is another term for flexible manufacturing technology.
A)True
B)False
Q7) What is the principle tool used by most managers to increase the reliability of their product offering?
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Chapter 17: Global Marketing and RD
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Q1) If media availability is limited,a firm should:
A)use a push strategy.
B)use a pull strategy.
C)consider a longer channel.
D)consider a shorter channel.
Q2) A push strategy makes sense when distribution channels are short.
A)True
B)False
Q3) Countries with fragmented retail systems tend to have long channels of distribution.
A)True
B)False
Q4) Which of the following statements about retail systems is true?
A)One factor contributing to greater retail concentration is an increase in car ownership.
B)The number of households with refrigerators leads to lesser retail concentration in developed countries.
C)There is a tendency for greater retail concentration in many developing countries.
D)Retail systems are very fragmented in developed countries.
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Chapter 18: Global Human Resource Management
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Q1) Steve is a manager at a multinational technology firm and is being sent to Japan to head the company's operations there.As a part of training,a familiarization trip to Japan has been planned for him before his formal transfer.What type of training is Steve receiving?
A)Language training
B)Cultural training
C)Practical training
D)Transfer training
Q2) A company that is successful at a localization strategy will realize experience curve and location economies.
A)True
B)False
Q3) If a firm is serious about building an international cadre,it may have to pay its international executives the same basic salary irrespective of their country of origin or assignment.
A)True
B)False
Q4) An organization's norms and value systems are known as its corporate culture.
A)True
B)False
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Chapter 19: Accounting in the International Business
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Q1) The balance sheet is the main instrument of financial control.
A)True
B)False
Q2) Describe the Lessard-Lorange Model.
Q3) Describe the Statement 52,whose requirements all U.S.-based multinational firms must follow.
Q4) An investor based in Japan buying General Motors stock through the NYSE would be an example of:
A)transnational financing.
B)transnational development.
C)transnational sale.
D)transnational investment.
Q5) In the United States and Great Britain,the financial accounting system is oriented toward providing individual investors with the information they need to make decisions about purchasing or selling corporate stocks and bonds.
A)True
B)False
Q6) Describe accounting in international business.What is accounting information?
Q7) Describe the current cost accounting system.
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Chapter 20: Financial Management in the International Business
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Q1) A _____ allows an entity to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government.
A)tax treaty
B)tax credit
C)deferral principle
D)tax benefit
Q2) If a firm invests its cash balances in money market accounts:
A)it will have unlimited liquidity and earn a high rate of interest.
B)it will have unlimited liquidity but will earn a relatively low rate of interest.
C)it will have limited liquidity but will earn a high rate of interest.
D)it will have limited liquidity but will earn a low rate of interest.
Q3) It is best recommended that an international business adopt a financial structure:
A)that is consistent with host-country norms.
B)that is insensitive to the local monetary policy.
C)that minimizes the cost of capital.
D)that allows it to easily evaluate its return on equity relative to local competitors in the same industry.
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