Course Introduction
International Economics Practice
Questions
International Economics examines the flow of goods, services, and capital across international borders, studying the forces and policies that govern trade and financial relations among nations. This course covers fundamental theories of international trade, such as comparative advantage and the Heckscher-Ohlin model, as well as the effects of tariffs, quotas, and trade agreements. It also explores international finance topics including exchange rates, balance of payments, and the impact of globalization on economic stability and growth. Students will gain analytical tools for assessing global economic issues, policy debates, and the interconnectedness of national economies in the modern world.
Recommended Textbook
International Business The New Realities 3rd Edition by S. Tamer Cavusgil
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Page 2
Chapter 1: Introduction: What Is International Business
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Q1) Each of the following has contributed to the rapid integration of world economies EXCEPT ________.
A) the growth of emerging market countries
B) the increase in trade barriers
C) advances in information technology
D) the liberalization of markets
Answer: B
Q2) International business is defined as the performance of ________ activities by firms across national borders.
A) marketing and fiduciary
B) trade and investment
C) finance and operational
D) manufacturing and sales
Answer: B
Q3) In the past, international trade and investment activities were mainly conducted by companies that sold services.
A)True
B)False
Answer: False
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Chapter 2: Globalization of Markets and the
Internationalization of the Firm
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Q1) Which of the following is characteristic of globalization of markets?
A) lack of skilled labor
B) conservatism
C) declining trade barriers
D) diminishing gap between the rich and the poor
Answer: C
Q2) The fourth phase of globalization is characterized by ________.
A) rise of railroads and ocean transport
B) reduction of barriers to trade by Western industrialized countries
C) the initiation of the Marshall Plan to reconstruct Europe
D) enormous growth of cross-border trade and investment
Answer: D
Q3) The representative from Business C is most likely from ________.
A) Italy
B) Brazil
C) the United States
D) France
Answer: B
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Chapter 3: Organizational Participants That Make
International Business Happen
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Sample Questions
Q1) A focal firm that creates and owns a new legal entity through equity investment or pooling of assets is called a(n) ________.
A) project-based partner
B) joint venture partner
C) build-own-transfer venture
D) nonequity venture partner
Answer: B
Q2) A firm that grants another the right to use an entire business system in exchange for fees, royalties, or other forms of compensation is known as a licensor.
A)True
B)False Answer: False
Q3) The activities of firms, intermediaries, and facilitators in international business are thoroughly distinct and rarely overlap.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Cultural Environment of International Business
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Q1) Culture is not ________.
A) about beliefs and values of society
B) relative
C) a collective phenomenon
D) inherited
Q2) In a short essay, explain how a "pay-for-performance system" and "lifetime employment" complicate company activities. Explain how these two cross-cultural differences reflect Hofstede's long-term versus short-term orientation.
Q3) Cultural intelligence focuses on specific capabilities important for high-quality personal relationships and effectiveness in culturally diverse settings and work groups.
A)True
B)False
Q4) English is the most common primary language in the world.
A)True
B)False
Q5) How is culture like an iceberg? In a short essay, explain the relationship between the iceberg theory and international business relationships.
Page 6
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Chapter 5: Ethics and International Business
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Sample Questions
Q1) Grease payments intended to expedite transactions are both accepted and legal in many countries.
A)True
B)False
Q2) What is a code of conduct? What function does it serve for businesses?
Q3) Creating alternatives is the last step of the framework for arriving at ethical decisions.
A)True
B)False
Q4) In a short essay, explain the five-step framework for making ethical decisions. Provide an example of how the framework can help managers resolve ethical dilemmas.
Q5) ________ means meeting humanity's needs without harming future generations.
A) Sustainability
B) Corporate social responsibility
C) Ethical behavior
D) Casuistry
Q6) In a short essay, explain the value of CSR for businesses.
Q7) Define ethics. Provide examples of unethical behavior exhibited by firms.
Q8) In a short essay, explain the concept of CSR. List some typical CSR values.
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Chapter 6: Theories of International Trade and Investment
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Q1) Competitive advantage refers to the ________.
A) belief that national prosperity is the result of a positive balance of trade, achieved by maximizing exports and minimizing imports
B) superior features of a country that provide unique benefits in global competition, typically derived from either natural endowments or deliberate national policies
C) distinctive assets or competencies of a firm that are difficult for competitors to imitate and are typically derived from specific knowledge, capabilities, skills, or superior strategies
D) relative absence of restrictions to the flow of goods and services between nations
Q2) The ________ states that it can be beneficial for two countries to trade without barriers as long as one is relatively more efficient at producing goods or services needed by the other.
A) monopolistic advantage theory
B) internalization theory
C) absolute advantage principle
D) comparative advantage principle
Q3) In a short essay, explain mercantilism and the monopolistic advantage theory.
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Chapter 7: Political and Legal Systems in National Environments
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Q1) The United States restricts foreign investments that might affect ________.
A) immigration reforms
B) labor negotiations
C) national security
D) manufacturing technologies
Q2) Government agencies, institutions, and public officials influence the manner in which foreign firms conduct business.
A)True
B)False
Q3) Which of the following best explains why India was once characterized by high country risk?
A) taxes and financial incentives benefited Indian businesses over foreign firms
B) Indian business leaders distrusted most European corporations
C) political leaders enacted laws that targeted foreign firms for harassment
D) Indian leaders feared the modern influences of American firms
Q4) Manufacturers face legal penalties and lawsuits under product safety and liability laws if they are responsible for damage, injury, or death caused by defective products.
A)True
B)False
Page 9
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Chapter 8: Government Intervention in International Business
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Q1) Subsidies may allow a manufacturer to practice dumping-that is, to charge an unusually low price for exported products.
A)True
B)False
Q2) Which of the following refers to an often-used form of nontariff trade barrier?
A) premium
B) subsidy
C) quota
D) grant
Q3) Tariffs that are ad valorem are ________.
A) based on the weight or size of the imported product
B) assessed as a percentage of the imported product's value
C) intended to provide a steady flow of income for the government
D) charged regardless of the imported product's value
Q4) Currency controls harm companies that export their products from the host country, but favor those that rely heavily on imported parts and components.
A)True
B)False
Q5) 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) Describe customs unions and explain why MERCOSUR is an example of a customs union. How can customs unions potentially reduce global free trade?
Q2) Rationalization after regional integration reduces redundancy in a firm and thus lowers costs and improves the firm's operational efficiency.
A)True
B)False
Q3) Which of the following terms is used to refer to a nation in an economic bloc gradually ceasing to trade with non-member nations?
A) trade diversion
B) trade creation
C) trade mandate
D) trading diaspora
Q4) Regional integration gives rise to trade creation and trade diversion.
A)True
B)False
Q5) Describe four advantages of regional integration. Provide an example to illustrate each point.
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Chapter 10: Understanding Emerging Markets
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Q1) When sourcing relies on foreign suppliers or production bases, it is known as
A) offshoring
B) protectionism
C) insourcing
D) subsidizing
Q2) Emerging markets are home to low-wage, high-quality labor for manufacturing and assembly operations.
A)True
B)False
Q3) ________ refer to post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure.
A) Underground economies
B) Emerging markets
C) Advanced economies
D) Transition economies
Q4) Samsung is an example of family conglomerate based in South Korea.
A)True
B)False
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Chapter 11: The International Monetary and Financial Environment
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Q1) The Bretton Woods Agreement was brought into existence in the late 1960s when the U.S. needed to finance government programs and the Vietnam War.
A)True
B)False
Q2) The levels of supply and demand for a currency in a free market vary ________ with its price.
A) rarely
B) occasionally
C) directly
D) inversely
Q3) Which of the following should be considered before the government takes any action to correct the high rate of inflation?
A) What have been the historical consequences of trade barriers in Country X?
B) What is the current price of coffee in the United States and Europe?
C) What will be the long-term effects of currency depreciation to Country X?
D) What other industries in Country X could replace agriculture?
Q4) What is the difference between a convertible currency and a nonconvertible currency? Explain why governments of some countries impose restrictions on currency convertibility.
Page 13
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Chapter 12: Strategy and Organization in the International Firm
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Q1) Which of the following strengthens the decision by Quik Meal executives to centralize operations?
A) Quik Meal offers five different flavors of energy gels for athletes.
B) Quik Meal executives report a steady rate of sales in the U.S. market.
C) Quik Meal country managers report few requests to alter product ingredients.
D) Quik Meal products use the same trademark and packaging in every country.
Q2) By standardizing international operations as much as possible yet being adaptable to the needs of local markets, a firm is utilizing a transnational strategy of globalization.
A)True
B)False
Q3) Which of the following is a disadvantage of a geographic area structure?
A) geographic area managers' lack of global orientation for developing and managing products
B) limited communications and coordination among the subsidiaries within each geographic region
C) minimal balance between global integration and local adaptation
D) decreased responsiveness to customer needs and wants in each regional/local market
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Chapter 13: Global Market Opportunity Assessment
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Q1) By monitoring key industry-specific indicators, a manager can estimate industry market potential.
A)True
B)False
Q2) Trade audits may provide managers insight regarding ________.
A) manufacturing cost estimates
B) company employee opinions
C) competitors' offerings and pricing
D) market fluctuation tendencies
Q3) Industry market potential is identical to company sales potential.
A)True
B)False
Q4) An arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties, or other forms of compensation is known as
A) franchising
B) licensing
C) outsourcing
D) offshoring
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Chapter 14: Exporting and Countertrade
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Q1) Countertrade is an elaborate and international form of the bartering system, and it accounts for one-third of all global trade.
A)True
B)False
Q2) Firms that internationalize their operations in order to reap the profits of a high-growth market are exhibiting a proactive business strategy.
A)True
B)False
Q3) Which of the following activities is applicable to the final stage of exporting?
A) The firm engages appropriate bankers and international trade attorneys.
B) The firm screens the most attractive export markets.
C) The firm modifies advertising and public relations to suit individual markets.
D) The firm acquires product development and foreign language skills.
Q4) Push factors include unfavorable trends in the domestic market that compel firms to explore opportunities beyond national borders.
A)True
B)False
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Chapter 15: Foreign Direct Investment and Collaborative Ventures
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Q1) Which of the following is the most likely motive behind firms in the mining industry wanting to enter new foreign markets?
A) access to natural resources
B) availability of excessive non-skilled labor force
C) increase in refining capacity
D) payment of wages remain the same in both the new market as well as the existing market
Q2) Describe the four primary barriers faced by retailers attempting to duplicate domestic success in international markets. Provide examples of mistakes made by U.S. retailers in foreign markets.
Q3) A firm that develops the capacity to sell its products by investing in marketing and selling operations is demonstrating ________.
A) forward vertical integration
B) backward vertical integration
C) centralization
D) decentralization
Q4) FDI is the least taxing entry strategy that a firm can choose.
A)True
B)False
17
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Chapter 16: Licensing, Franchising, and Other Contractual Strategies
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Q1) Information technology has increased the success and growth of international franchising operations by ________.
A) eliminating the need for corporate meetings to discuss quality control
B) improving communication between MNE managers and their franchisees
C) reducing Internet sales and the need for freight forwarding services
D) assigning franchisors maximum control to oversee franchisees activities
Q2) Exporting and foreign direct investing are two common types of contractual entry strategies.
A)True
B)False
Q3) In a system franchising agreement, the franchisee provides ________.
A) training and ongoing support
B) trademark-protected business concepts
C) down-payment plus royalty
D) usage rights for products and patents
Q4) Which of the following countries is home to the largest number of franchisors?
A) United States
B) Britain
C) China
D) Canada
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Chapter 17: Global Sourcing
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Q1) In a short essay, explain how global sourcing can affect home-country employees.
Q2) Firms usually internalize those value-chain activities they consider part of their core competencies.
A)True
B)False
Q3) Firms often establish their own sourcing operations abroad to maintain control of outsourced activities and technologies.
A)True
B)False
Q4) ________ is a key player in global sourcing in South Asia.
A) Mongolia
B) North Korea
C) the Philippines
D) Pakistan
Q5) Most companies cite cost cutting as the main reason for global sourcing.
A)True
B)False
Q6) Distinguish between captive sourcing and contract manufacturing.
Q7) Discuss the major risks associated with global sourcing.
Q8) How can a focal firm protect its interests in the supplier relationship?
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Chapter 18: Marketing in the Global Firm
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Q1) Perhaps the most important distinction between standardization and adaptation is that ________.
A) standardization helps the firm customize products according to customer preferences, while adaptation helps the firm save time
B) standardization helps the firm cut costs, while local adaptation helps the firm more precisely cater to local needs and requirements
C) standardization helps the firm cater to the needs of local customers, while adaptation helps the firm save costs through mass production
D) standardization helps the firm upgrade quality to suit the unique tastes of consumers, while adaptation emphasizes uniformity
Q2) The practice of pricing intermediate or finished products exchanged among the subsidiaries and affiliates of the same corporate family located in different countries is known as ________.
A) transfer pricing
B) breakeven pricing
C) premium pricing
D) discounting
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Chapter 19: Human Resource Management in the Global Firm
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Q1) ________ is a formal process for assessing how effectively employees perform their jobs.
A) Performance planning
B) Performance management
C) Performance appraisal
D) Performance guarantee
Q2) The problem of noncomparable outcomes arises because of differences in economic, political, legal, and cultural variables.
A)True
B)False
Q3) An MNE would most likely employ a host-country national when ________.
A) it has substantial knowledge regarding upstream value-chain activities
B) it emphasizes R&D and manufacturing
C) it wants to maintain strong control over local operations
D) it needs specialized knowledge about the local market
Q4) Firms with global mindsets are characterized by ________.
A) staff diversity
B) parochialism
C) a strong sense of national pride
D) rigid hiring policies
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Chapter 20: Financial Management and Accounting in the Global Firm
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Q1) Direct quote is the number of units of foreign currency obtained for one unit of domestic currency.
A)True
B)False
Q2) Intra-corporate fund transfers enable MNEs to access cash from subsidiaries through royalty payments, transfer pricing, and multilateral netting.
A)True
B)False
Q3) Euro bond is a bond sold outside the issuer's country and denominated in the currency of the country where issued.
A)True
B)False
Q4) A fronting loan would most likely be utilized by an MNE attempting to ________.
A) increase transfer pricing
B) reduce dividend payments
C) minimize taxes
D) conceal corporate debt
Q5) Describe four factors responsible for the fast paced growth of the global capital market.
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