114 terms

Environment of International Business

Which of the following countries has been the largest recipient of foreign direct investment and received about $70 billion a year in inflows in 2005 and 2006?
as a hedge against unfavorable currency movements.
In the 1970s, many Japanese firms invested in North America and Europe
Decreased privatization
Which of the following does not help create an economic system that is favorable to international business?
economic growth in developed nations has offset the fall in unskilled workers' share of national income, raising their living standards.
If the critics of globalization are correct, all of the following things must be shown except:
the gap between rich and poor had narrowed in all OECD countries
A study by the OECD, whose members include the 20 richest economies in the world, noted all of the following except:
small, U.S. entrepreneurial firms dominated the international business scene
Although the characteristics of the global economy have changed dramatically over the past 30 years, as late as the 1960s all of the following demographic characteristics were true, except:
National economies are becoming more independent and moving away from the global economic system
Which of the following statement pertaining to changes in the global economy of the 21st century is not true?
Stock of foreign direct investments
What is the total cumulative value of foreign investments best referred to as?
The growth of FDI resumed in 2004 and continued through 2006.
Which of these statements pertaining to cross-border FDI flows is true?
increased, reduced
Globalization has _____ the opportunities for a firm to expand its revenues by selling around the world and _____ its costs by producing in nations where key inputs are cheap.
Reduced transportation costs
Which of the following is not an impediment that makes it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe?
Mexico committed to tougher enforcement of environmental protection regulations.
Before NAFTA was passed
National economies are turning into independent economic systems
Which of the following is not characteristic of globalization?
industrial goods
The most global markets currently are markets for:
taking advantage of lower wages in foreign markets
When a company "exports jobs" overseas, the company is:
The share of the total FDI stock accounted for by which of the following countries increased markedly from 1980 to 2005?
developing countries
Firms based in _____ accounted for 14.7 percent of the stock of foreign direct investment in 2007, up from only 1.1 percent in 1980.
theocratic totalitarianism.
A state where political power is monopolized by a party, group, or individual that governs according to religious principles is best described as following:
A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved is BEST known as a:
They are almost the same for all countries
Which of the following statements about the legal systems of countries is false?
product safety laws.
Safety standards to which a product must adhere are set by:
In a _____ economy, certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning.
is a form of government in which one person or political party exercises absolute control over all spheres of human life.
Socialist ideology is split into two camps—communists and individualists.
Which of the following statements about socialism is false?
It directed rich countries to comply with its rules of intellectual property protection within five years.
Which of the following statements about the trade-related aspects of intellectual property rights agreement is false?
is based on tradition, precedent, and custom.
The common law system:
The protection of intellectual property rights is more or less the same in all countries.
Identify the incorrect statement pertaining to intellectual property rights.
Social strata
These strata are typically defined on the basis of characteristics such as family background, occupation, and income.
allows an individual to change his/her position via personal achievements.
A class system:
Culture is static
Which of the following is not true regarding culture?
This is an Islamic banking method where banks lend money to a business, and rather than charging that business interest on the loan, they take a share in the profits that are derived from the investment.
class consciousness.
A condition where people tend to perceive themselves in terms of their class background and this shapes their relationships with members of other classes is known as:
group membership
A central value of Japanese culture is the importance attached to:
the relationship between gender and work roles.
Hofstede's masculinity vs. femininity dimension examined:
Social mobility
Which of the following refers to the extent to which individuals can move out of the strata into which they are born?
_____ are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighborly behavior, and the like.
They do not influence social structure
Which of the following statements about values and norms of a culture is not true?
Human beings have fundamental rights and privileges that transcend national boundaries.
Identify the correct statement about the rights theories.
The act outlawed the paying of bribes to foreign government officials to gain business.
Which of the following observations about the Foreign Corrupt Practices Act is true?
Cultural relativism
Child labor is permitted and widely employed in Country X. A multinational company entering Country X decides to employ minors in its subsidiary, even though it is against the multinational's home-country ethics. Which of the following approaches to business ethics would justify the actions of the multinational company?
Cultural relativism
The idea that universal notions of morality transcend different cultures is implicitly rejected by:
prohibition of trade unions
The United Nations' Universal Declaration of Human Rights, related to employment, upholds all of the following except:
the moral worth of actions or practices is determined by their consequences.
The utilitarian approach to business ethics suggests that:
typically comprise customers, suppliers, lenders, etc.
External stakeholders:
According to the _____ approach, the best decisions are those that produce the greatest good for the greatest number of people.
Environmental regulations are similar across developed and developing nations.
Identify the incorrect statement about environmental regulations.
Moral courage
Which of the following enables managers to walk away from a decision that is profitable, but unethical?
National competitive advantage theory
Identify the theory that suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.
Countries have varying endowments of the various factors of production
Which of the following is an assumption of the Heckscher-Ohlin theory?
A product in the early stage of the product life-cycle is imported by the country where it was innovated.
Identify the incorrect statement pertaining to Raymond Vernon's product life-cycle theory.
supply fluctuations.
According to Porter, all of the following are broad attributes of a nation that shape the environment in which local firms compete except:
Which theory predicts that countries will export those goods that make intensive use of factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce?
New trade
Which theory stresses that in some cases countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms?
Comparative advantage
This theory, advanced by the 19th-century English economist David Ricardo, forms the intellectual basis of the modern argument for unrestricted free trade.
All of the following theories show why it is beneficial for a country to engage in international trade even for products it is able to produce for itself except:
differing management ideologies.
Porter explains the United States' loss of competitiveness in engineering-based industries where manufacturing processes and product design issues are critical as a consequence of:
positive-sum game
Trade produces net gains for all involved and hence is a:
strategic trade
According to the _____ policy, subsidies can help a firm achieve a first-mover advantage in an emerging industry.
Buy America Act
The _____ 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 advantage.
Its lack of ability to force any member nation to take an action to which it is opposed.
Which of the following is not a reason why WTO is being criticized by those opposing free trade?
agricultural subsidies.
In the 1986 Uruguay Round, GATT members sought to write rules for promoting all of the following except:
reduce the overall efficiency of the world economy.
Import tariffs:
Strategic trade policy
_____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.
the extra profit producers make when supply is artificially limited by an import quota.
A quota rent is:
They help foreign producers gain a competitive advantage over domestic producers
Which of the following observations about subsidies is false?
there would be overproduction of products that are heavily subsidized.
The WTO argues that by removing all tariff barriers and subsidies to agriculture, all of the following would occur except:
Bound tariff rates
_____ are the highest rate that can be charged, which is often, but not always, the rate that is charged.
World Trade Organization
According to the 1986 Uruguay Round, the _____ was to be created to implement the GATT agreement.
no agreement on the reduction of barriers to cross-border trade and investment.
The "millennium round" ended in 1999 with:
Import quota
In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. Identify the trade restriction being imposed by the United States.
Credit portfolios
Which of the following is not one of the main instruments of trade policy?
to further foreign policy objective
If a government grants preferential trade terms to a country it wants to build strong relations with, the government is employing a p
voluntary export restraint.
A quota on trade imposed by the exporting country, typically at the request of the importing country's government is referred to as:
They help foreign producers gain a competitive advantage over domestic producers.
Which of the following observations about subsidies is false?
infant industry
According to the _____ argument, governments should temporarily support new industries until they have grown strong enough to meet international competition
Import quota
This is a direct restriction on the quantity of some good that may be imported into a country.
the total accumulated value of foreign-owned assets at a given time.
The stock of FDI is:
current account
The _____ tracks the export and import of goods and services.
pragmatic nationalism
A distinctive aspect of _____ is the tendency to aggressively court FDI believed to be in the national interest by, for example, offering subsidies to foreign MNEs in the form of tax breaks or grants.
debit on the current account of the home country's balance of payments.
Three costs of FDI concerns of host countries arise from all of the following except:
Even though greenfield investments are comparatively less risky for a firm, acquisitions always yield higher profits.
Which of the following is not a reason why firms prefer to acquire existing assets rather than undertake greenfield investments?
developed; each other's markets.
Historically, most FDI has been directed at the _____ nations of the world as firms based in advanced countries invested in:
multipoint competition.
When two or more enterprises encounter each other in different regional markets, national markets, or industries, there is:
merger and acquisition
When strategic assets such as brand loyalty, customer relationships, or distribution systems are important, _____ investments are more appropriate.
When jobs are created in local suppliers as a result of the FDI and when jobs are created because of increased local spending by employees of the MNE, the MNE has ano _____ effect on employment.
combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI.
John Dunning, a champion of the eclectic paradigm, argues that:
offshore production.
FDI undertaken to serve the home market is known as:
when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments.
According to Knickerbocker:
taxation of income in both home and host country.
Double taxation is:
made via mergers and acquisitions
Most cross-border investment is:
In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.
Licensing would be a good option for firms in which of the following industries?
balance-of-payments account
A _____ keeps track of a country's payments to and its receipts from other countries.
_____ involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold.
resource-transfer effect of FDI
When a company brings capital and/or technology to a host country, the host country benefits from the:
European Council
The _____ represents the interests of member states and is clearly the ultimate controlling authority within the EU.
European Commission
The _____ is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states.
the trade diversion effects of MERCOSUR outweigh its trade creation effects.
According to Alexander Yeats:
free trade pact
MERCOSUR originated as _____ between Brazil and Argentina in 1988.
Free trade areas
These are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.
the Treaty of Rome signed in 1957.
The European Community was established by:
The European Coal and Steel Community, formed in 1951, was a forerunner of:
Collectively, the _____ member states account for about 55 percent of the world's GNP and 49 percent of world trade.
the Andean Pact
Bolivia, Peru, Ecuador, Columbia, and Venezuela are all members of:
It has been highly successful in achieving cooperation in its industrial policies.
Which of the following is not true of ASEAN?
foreign exchange risk.
One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates, commonly referred to as:
It yields accurate predictions in the short run
Identify the incorrect statement about the PPP theory.
A range of barter-like agreements by which goods and services can be traded for other goods and services is known as:
PPP theory
The _____ suggests that given relatively efficient markets, the price of a "basket of goods" should be roughly equivalent in each country.
law of one price
According to the _____, in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.
efficient market school
The _____ argues that forward exchange rates do the best possible job of forecasting future spot rates and therefore investing in forecasting services would be a waste of money.
Countries might be forced to use countertrade when a currency is:
bandwagon effect
When traders move as a herd in the same direction at the same time such as what occurred when George Soros betted against the British pound in 1992, _____ occurs.
According to the law of one price, if the exchange rate between the British pound and the dollar is ≤1 = $1.50, a jacket that retails for $75 in New York should sell for _____ in London
Fisher Effect
The _____ states that a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.