International Economics Practice Questions
Course Introduction
International Economics examines the economic interactions among countries, focusing on the theory and practice of international trade and finance. The course covers topics such as comparative advantage, trade policy, exchange rates, balance of payments, and the impact of globalization on national economies. Students will analyze how governments and international institutions influence economic relationships, assess the effects of tariffs and trade agreements, and explore global financial crises. Through theoretical frameworks and real-world case studies, this course provides students with the tools to understand and evaluate the complexities and challenges of the modern global economy.
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International Business 15th Edition by John Daniels
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Page 2
Chapter 1: Globalization and International Business
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Q1) Which of the following statements would most likely be made by a SUPPORTER of globalization?
A) Globalization encourages the adoption of uniform and superior standards for combating environmental problems.
B) Economic growth created by globalization is largely in services, which involves the use of few nonrenewable resources.
C) Global competition discourages resource-saving technologies, which are costly.
D) Air pollution and toxic runoff problems increase with global economic growth.
Answer: A
Q2) Politics,law,culture,and economy are all examples of ________ factors that can affect the ways in which companies produce and sell their products in foreign markets.
A) social
B) physical
C) competitive
D) political
Answer: A
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Chapter 2: The Cultural Environments Facing Business
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Q1) The lack of cultural guidebooks and research specifically for international managers poses a significant problem for global firms.
A)True
B)False
Answer: False
Q2) Preference for a consultative management style is prevalent in a society with low power distance.
A)True
B)False
Answer: True
Q3) Jack,an American accounts manager,is preparing a presentation for a group of Japanese business people.Jack's presentation would be most effective if he ________.
A) told an opening joke to put everyone at ease
B) used slang to create an informal atmosphere
C) used long words to impress his counterparts
D) budgeted extra time for translation and clarification
Answer: D
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Chapter 3: The Political and Legal Environments Facing Business
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Q1) ________ refer(s)to the creative ideas,innovative expertise,or intangible insights that give an individual,company,or country a competitive advantage.
A) Proprietary goods
B) Exclusive ownership
C) Restrictive goods
D) Intellectual property
Answer: D
Q2) A democracy grants the voting citizenry the power to alter the laws and structures of government.
A)True
B)False Answer: True
Q3) International law takes precedence over national laws in determining permissible practices in pricing,distribution,advertising,and promotion of products and services in a particular country.
A)True
B)False Answer: False
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Chapter 4: The Economic Environments Facing Businesses
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Q1) An economic system is the set of structures and processes that ________ in a country.
A) guides the allocation of resources and shapes the conduct of business activities
B) directs the movement of specific products to specific consumers
C) sets the standards of competitive success for companies in the economy
D) stipulates the roles and responsibilities of consumers
Q2) There is a positive correlation between economic freedom and economic growth.
A)True
B)False
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) A car manufactured in the U.S.by Toyota would be included in the calculation of the GDP for the United States.
A)True
B)False
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Chapter 5: International Trade and Factor-Mobility Theory
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Q1) In this example,assume that both trade and production factors are internationally mobile.Using domestic labor,the labor cost per silicon chip is $.10 in Japan and $.20 in the United States.Using domestic capital,the capital cost per chip is $.10 in Japan and $.05 in the United States.Chip transportation in either direction is $.10.Japanese labor is willing to work in the United States for $.15 per chip including the workers' transport cost.U.S.capital will go to Japan at a cost of $.08 per chip including transaction costs.Which silicon chips will the United States buy?
A) those made in Japan with Japanese labor and capital
B) those made in the United States with U.S. labor and capital
C) those made in Japan with Japanese labor and U.S. capital
D) those made in the United States with Japanese labor and U.S. capital
Q2) Understanding trade theories helps companies know if they will need to compete against goods and services produced abroad.
A)True
B)False
Q3) What is the difference between the free trade theories of absolute advantage and comparative advantage? How can free trade improve global efficiency?
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Page 7
Chapter 6: Governmental Influence on Trade
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Q1) The argument for using protectionism to bring about industrialization in developing countries presumes that gains will occur because the industry will become internationally competitive.
A)True
B)False
Q2) 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
Q3) Assume a government places restrictions on a specific product from a specific foreign country.What would be the government's most likely concern about the foreign country's response?
A) the foreign producers raising the prices of their exports
B) the foreign country restricting its own imports
C) the foreign country restricting its exports in that industry
D) the foreign producers seeking other markets
Q4) What are the disadvantages of import restrictions in regards to creating domestic employment opportunities?
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Chapter 7: Cross-National Cooperation and Agreements
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Q1) Which of the following are members of NAFTA?
A) the United States, Canada, and Mexico
B) North America and Latin America
C) the United Kingdom, the United States, and Canada
D) the United States, Canada, and Brazil
Q2) The shifting of trade to countries in a regional group at the expense of trade with countries not in the group is known as trade internalization.
A)True
B)False
Q3) Many NGOs,including Africa Now,Quaker Peace and Social Witness,and Save the Children,are members of the ________.
A) Ethical Trading Initiative
B) International Red Cross Council
C) United Nations Global Compact
D) United Nations Economic and Social Council
Q4) Identify and briefly compare the major regional trading groups in Latin America,Asia,and Africa.
Q5) What has been the impact of NAFTA on trade and employment in NAFTA nations?
Q6) Are commodity agreements effective? Why or why not?
Page 9
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Chapter 8: Global Foreign-Exchange Markets
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Q1) If the forward rate for a foreign currency is less than the spot rate,the foreign currency is selling at a forward premium.
A)True
B)False
Q2) If Toranaga-san,who works for a Japanese trading company that operates in Japanese yen,wanted to purchase Spanish castanets from a company in Barcelona and needed Euros to complete the transaction,he would use the ________ to gain access to spot Euros.
A) stock market
B) foreign-exchange market
C) New York Stock Exchange
D) international export market
Q3) In the spot market,the spread is the difference between the bid and offer rates and is the trader's profit margin.
A)True
B)False
Q4) The bid is the price at which the trader is willing to sell foreign currency.
A)True
B)False
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Chapter 9: The Determination of Exchange Rates
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Q1) The Bretton Woods Agreement established a system of fixed exchange rates under which each IMF member country set a ________.
A) quota
B) par value
C) gold standard
D) nominal interest rate
Q2) According to purchasing power parity,if the domestic inflation rate is ________ than that in the foreign country,the domestic currency should be ________ than that of the foreign country.
A) lower; weaker
B) higher; higher
C) lower; stronger
D) higher; stronger
Q3) Endaka,the "high yen," caused financial problems for ________.
A) Japanese foreign-exchange reserves
B) American foreign-exchange reserves
C) Japanese importers
D) Japanese exporters
Q4) Describe the exchange rate arrangements used in the EU,Hong Kong,China,and the U.S.
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Chapter 10: Global Capital Markets
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Q1) MNEs most likely use offshore debt markets ________.
A) to hide their cash from tax authorities
B) to take advantage of their ability to access capital in different countries
C) since debt in foreign countries is always cheaper than in the home country market
D) because investors don't like to invest in companies that only raise capital in their home markets
Q2) According to U.S.tax law,if a foreign subsidiary earns income,________.
A) its income is immediately taxable to the parent, irrespective of the type of income earned
B) that income is not taxable to the parent company as long as the subsidiary pays income taxes in the country where it is earned
C) passive income is taxable to the parent unless the parent company is a controlled foreign corporation
D) active income is taxable to the parent when it is remitted as a dividend
Q3) The Eurocurrency market is limited to exchanges that include the euro.
A)True
B)False
Q4) What is an offshore financial center? What are the main characteristics of OFCs?
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Page 12
Chapter 11: Globalization and Society
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Q1) The teleological approach asserts that individuals make moral judgments independent of consequences.
A)True
B)False
Q2) What is the Foreign Corrupt Practices Act? How has this law affected ethical behavior among international businesses?
Q3) The Ethical Trading Initiative (ETI)is primarily focused on ________.
A) fair trade laws for undeveloped countries
B) tiered pricing by pharmaceutical firms
C) greenhouse gas emission reduction
D) employment practices of MNEs
Q4) Governmental agencies and nongovernmental organizations monitor the behavior of companies and their employees to ensure that laws are being followed.
A)True
B)False
Q5) GE's Ecomagination program has enabled the firm to develop a competitive advantage over its competitors.
A)True
B)False
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Chapter 12: The Strategy of International Business
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Q1) In the demand-pull versus supply-push views of the market,which of the following is best classified as a push dynamic that drives supply in the global market?
A) digitization
B) media access
C) standardization
D) market globalization
Q2) A global strategy tends to be more successful when ________.
A) buyers are looking for customized products at bargain prices
B) the industry's product is a commodity
C) entry barriers are low for new firms
D) suppliers have little bargaining power
Q3) Which of the following is the primary limitation of the transnational strategy?
A) poor local adaptation
B) cross-unit coordination difficulties
C) duplication of subsidiary activities
D) inability to leverage core competencies
Q4) What is the difference between primary and secondary activities in the value chain?
Describe the functions of configuration and coordination in these value activities.
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Chapter 13: Country Evaluation and Selection
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Q1) In a short essay,discuss liquidity preference as it relates to monetary risk.
Q2) What is meant by liability of foreignness? How might this influence location and allocation decisions?
Q3) Headquarters management often feels that people within an established operation are the best judge of the operation's investment needs.
A)True
B)False
Q4) When choosing international operating locations,companies should outsource the preparation of grids or matrices to experts rather than preparing them with their own personnel.
A)True
B)False
Q5) Escalation of commitment is best described as the ________.
A) strategy of first entering a country on a small scale
B) process of entering a country because "everyone else is going there"
C) expectation of a higher return in more politically risky environments
D) increased likelihood of investing in a country because of having spent considerable time and money in examining it
Q6) What is scanning? What opportunities and risks are most relevant to scanning?
Page 15
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Chapter 14: Export and Import
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Q1) The primary duty of the customs agency of a government is the assessment and collection of all duties,taxes,and fees on imported merchandise.
A)True
B)False
Q2) A freight forwarder performs which of the following functions?
A) arranging the fastest and cheapest transportation of products to and from foreign suppliers
B) taking title to the goods it exports and imports from country to country
C) acting as a sales representative in a foreign market
D) valuing products that qualify for favorable tariffs
Q3) Exporters who opt for direct exporting are most likely to ________.
A) sustain long-term profitability
B) sell products to domestic retailers
C) depend on international marketers
D) sell products to a foreign distributor
Q4) The U.S.government has more than 10,000 tariff classifications and more than half of them are subject to interpretation.
A)True
B)False
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Chapter 15: Direct Investment and Collaborative Strategies
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Q1) Franchisees sometimes wish to change the product or service offered by the franchisor to better fit local market needs abroad.Why are these changes a problem for franchisors?
A) Too many changes eliminate the need for the franchisors.
B) The royalties as a percentage of sales decrease.
C) Governments impose more stringent operating restrictions.
D) Sales decrease because consumers want to get the "real thing."
Q2) All of the following are arguments for permitting foreign control of key industries EXCEPT which one?
A) Managers, whether in a foreign or local company, make decisions based on what they think is best for the company rather than based on some local socio-economic agenda.
B) MNEs staff their organizations abroad mainly with local nationals and depend in part on their input for making decisions.
C) Foreign governments can no longer use their home-based companies to influence policies abroad.
D) The security arguments for restrictions on foreign ownership are really just a sham to protect politically powerful industries and employment.
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Chapter 16: The Organization of International Business
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Q1) Andrews Enterprises,which uses an international division structure,should be able to respond quickly to foreign activities but will most likely experience costly country-to-country duplication.
A)True
B)False
Q2) In general terms,we see the principles of horizontal differentiation in the design logic of ________.
A) vertical differentiation
B) decentralization
C) the value chain
D) the unity-of-command principle
Q3) Which of the following factors increasingly encourages MNEs to install a geographic division structure?
A) growth of emerging markets
B) diversification of products
C) rise of social networking
D) global recession
Q4) What is the difference between a classical structure and a neoclassical structure? Provide examples of each type.
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Chapter 17: Marketing Globally
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Q1) Executives at Apex decided to use a production orientation in the firm's international marketing efforts.Which of the following statements best supports this decision?
A) Top management at Apex is committed to the concept of social responsibility.
B) Apex is willing to alter its products to fit mass-market needs in foreign countries offering growth potential.
C) Apex will produce in each country where it sells.
D) Apex will aim sales at foreign-market segments that resemble segments to which it aims domestically.
Q2) What is the most likely reason that companies such as Gillette (razor blades)and 3M (scouring pads)sell products in smaller package sizes in some developing countries?
A) Family size is small in those countries.
B) Some governments require the smaller sizes.
C) In those countries, many consumers lack sufficient cash to buy larger quantities.
D) These are products for which the cost of altering package size is negligible.
Q3) In a short essay,discuss the standardization of two marketing components: advertising and distribution.
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Chapter
18: Global Manufacturing and Supply-Chain Management
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Q1) Gates Manufacturing is striving to improve its performance reliability,speed of delivery,and product reliability.Gates is most likely focusing on a(n)________ strategy.
A) flexibility
B) innovation
C) dependability
D) quality
Q2) In order to save costs and consolidate its manufacturing capacity,Samsonite has ________.
A) decreased investment in R&D
B) moved from a centralized configuration to a decentralized configuration
C) increased the amount of final goods and components it outsources
D) diversified its reseller base
Q3) Configuration is the linking or integrating of activities into a unified system.
A)True
B)False
Q4) The use of JIT does not depend on the quality of incoming parts or the time of their arrival.
A)True
B)False
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Chapter 19: International Accounting and Finance Issues
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Q1) The degree of caution companies display in valuing assets and recognizing income is known as conservatism.
A)True
B)False
Q2) The standard-setting organization tasked with the challenge of determining one set of accounting standards that can be used worldwide is the ________.
A) Global Financial Accounting Standards Board
B) International Organization of Securities Commissions
C) International Financial Reporting Committee
D) International Accounting Standards Board
Q3) The International Accounting Standards Board is composed of international securities regulators and is attempting to harmonize accounting standards through issuing International Financial Reporting Standards.
A)True
B)False
Q4) What factors influence international accounting practices? What forces are leading to the global convergence of accounting practices?
Q5) How do exchange rates affect budgets used to evaluate performance in MNEs?
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Page 21
Chapter 20: International Human Resource Management
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Q1) A polycentric staffing policy is well matched with a transnational strategy.
A)True
B)False
Q2) Ferguson Manufacturing,an American MNE,has facilities in India and Mexico.Ferguson fills management positions at the facility in India with Indians and management positions in Mexico with Mexicans.Ferguson most likely follows a(n)________ approach to staffing.
A) ethnocentric
B) geocentric
C) polycentric
D) intercentric
Q3) Terrell,a manager with Qualsys Technologies,has been on an expatriate assignment in Russia for the last three years.Terrell's foreign assignment has ended,and he is working with HR to return to the U.S.and begin a new job at the firm's headquarters in Philadelphia.In which activity is Terrell most likely involved?
A) expatriation
B) repatriation
C) demotion
D) promotion
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