Question 1

A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk adjusted rate is

Accepted Answer

A) equal 
B) zero. 
C) negative. 
D) positive. 
A) equal 
B) zero. 
C) negative. 
D) positive. D

Question 2

The higher the interest rate

Accepted Answer

A) The more valuable revenue today is in comparison with revenue in the future. 
B) The less valuable revenue today is in comparison with revenue in the future 
C) The less costs today should be considered in capital budgeting 
D) The less concerned you should be about the timing of a stream of revenue. 
A) The more valuable revenue today is in comparison with revenue in the future. 
B) The less valuable revenue today is in comparison with revenue in the future 
C) The less costs today should be considered in capital budgeting 
D) The less concerned you should be about the timing of a stream of revenue. A

Question 3

The basis of trade between countries lies in the

Accepted Answer

A) The difference in factor endowment 
B) The difference in money standard 
C) Difference in political system 
D) All of the above 
A) The difference in factor endowment 
B) The difference in money standard 
C) Difference in political system 
D) All of the above D

Question 4

The Internal Rate of Return is defined as

Accepted Answer

A) the discount rate which causes the payback to equal one year. 
B) the discount rate which causes the NPV to equal zero. 
C) the ROE when the NPV equals 0. 
D) the ROE associated with project maximization 
A) the discount rate which causes the payback to equal one year. 
B) the discount rate which causes the NPV to equal zero. 
C) the ROE when the NPV equals 0. 
D) the ROE associated with project maximization

Question 5

In Heckscher-Ohlin model, factor abundance have been defined in two terms. Those are

Accepted Answer

A) Price and location criteria 
B) Physical and location criteria 
C) Price and physical criteria 
D) None of the above 
A) Price and location criteria 
B) Physical and location criteria 
C) Price and physical criteria 
D) None of the above

Question 6

Heckscher-Ohlin theory of international trade is based on

Accepted Answer

A) Factor price equalization 
B) Absolute advantage 
C) Factor endowment differentials 
D) Labour productivity 
A) Factor price equalization 
B) Absolute advantage 
C) Factor endowment differentials 
D) Labour productivity

Question 7

David Ricardo propounded theory of

Accepted Answer

A) Law of reciprocal demand 
B) Absolute theory of international trade 
C) Comparative theory of international trade 
D) None of the above 
A) Law of reciprocal demand 
B) Absolute theory of international trade 
C) Comparative theory of international trade 
D) None of the above

Question 8

The net present value

Accepted Answer

A) Is calculated by discounting all cash flows to present value and subtracting outflows from inflows 
B) Calculates the rate of return which leaves you indifferent between undertaking the project, and not undertaking the project. 
C) Leads to the same decisions as the use of the payback peri 
A) Is calculated by discounting all cash flows to present value and subtracting outflows from inflows 
B) Calculates the rate of return which leaves you indifferent between undertaking the project, and not undertaking the project. 
C) Leads to the same decisions as the use of the payback peri

Question 9

Trade among different regions within the same country is known as

Accepted Answer

A) International trade 
B) Interregional trade 
C) Bilateral trade 
D) Trilateral trade 
A) International trade 
B) Interregional trade 
C) Bilateral trade 
D) Trilateral trade

Question 10

When using the net present value and the internal rate of return to evaluate capital projects:

Accepted Answer

A) The IRR is preferred because it more closely reflects the firm's goal of maximization of shareholder wealth. 
B) Both will lead to the same decision if projects are mutually exclusive. 
C) The two techniques may give different answers if the initial costs of the projects differ. 
D) Both assume that the firm can reinvest earnings at the same rate. 
A) The IRR is preferred because it more closely reflects the firm's goal of maximization of shareholder wealth. 
B) Both will lead to the same decision if projects are mutually exclusive. 
C) The two techniques may give different answers if the initial costs of the projects differ. 
D) Both assume that the firm can reinvest earnings at the same rate.

Question 11

The main objective of international trade is

Accepted Answer

A) To maximize production 
B) To remove political bondage 
C) To establish world bank 
D) To remove poverty 
A) To maximize production 
B) To remove political bondage 
C) To establish world bank 
D) To remove poverty

Question 12

If the internal rate of return (r) is less than the cost of capital,the project should be

Accepted Answer

A) accepted 
B) rejected 
C) neither accept nor reject 
D) none of the above 
A) accepted 
B) rejected 
C) neither accept nor reject 
D) none of the above

Question 13

Trade between nations occur due to

Accepted Answer

A) Difference in monetary 
B) Difference in resource endowment 
C) Difference in political status 
D) Difference in population 
A) Difference in monetary 
B) Difference in resource endowment 
C) Difference in political status 
D) Difference in population

Question 14

The basis of trade between countries lies in the

Accepted Answer

A) Difference in monetary standard 
B) Difference in political system 
C) Difference in resource endowment 
D) None of the above 
A) Difference in monetary standard 
B) Difference in political system 
C) Difference in resource endowment 
D) None of the above

Question 15

The absolute advantage theory of international trade is associated with

Accepted Answer

A) David Ricardo 
B) Adam Smith 
C) Samuelson 
D) Heckscher-Ohlin 
A) David Ricardo 
B) Adam Smith 
C) Samuelson 
D) Heckscher-Ohlin

Question 16

Why are projects with negative net present values (NPVs) unacceptable to a firm?

Accepted Answer

A) Returns lower than the cost of capital result in firm failure. 
B) Returns with negative NPVs cause an equal profit ratio. 
C) Returns with negative NPVs are acceptable to a firm 
D) Returns lower than the cost of capital result in higher profit ratios 
A) Returns lower than the cost of capital result in firm failure. 
B) Returns with negative NPVs cause an equal profit ratio. 
C) Returns with negative NPVs are acceptable to a firm 
D) Returns lower than the cost of capital result in higher profit ratios

Question 17

One similarity between international trade and inter-regional trade is that in general both must overcome

Accepted Answer

A) The difference in language 
B) Tariffs 
C) Distance or space 
D) The difference in currencies 
A) The difference in language 
B) Tariffs 
C) Distance or space 
D) The difference in currencies

Question 18

The imposition of an import tariff by a nation usually

Accepted Answer

A) improves the nation's terms of trade and increases the volume of trade 
B) worsens the nation's terms of trade but increases the volume of trade 
C) improves the nation's terms of trade but reduces the volume of trade 
D) None of the above 
A) improves the nation's terms of trade and increases the volume of trade 
B) worsens the nation's terms of trade but increases the volume of trade 
C) improves the nation's terms of trade but reduces the volume of trade 
D) None of the above

Question 19

According to Heckscher-Ohlin theory as a result of international trade, the difference in factor price between nations

Accepted Answer

A) diminishes 
B) increases 
C) is constant 
D) All of the above 
A) diminishes 
B) increases 
C) is constant 
D) All of the above

Question 20

Adam Smith propounded the theory of

Accepted Answer

A) Comparative cost 
B) Opportunity cost 
C) Absolute advantage in international trade 
D) None of the above 
A) Comparative cost 
B) Opportunity cost 
C) Absolute advantage in international trade 
D) None of the above

A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk adjusted rate is

The higher the interest rate

The basis of trade between countries lies in the

The Internal Rate of Return is defined as

In Heckscher-Ohlin model, factor abundance have been defined in two terms. Those are

Heckscher-Ohlin theory of international trade is based on

David Ricardo propounded theory of

The net present value

Trade among different regions within the same country is known as

When using the net present value and the internal rate of return to evaluate capital projects:

The main objective of international trade is

If the internal rate of return (r) is less than the cost of capital,the project should be

Trade between nations occur due to

The basis of trade between countries lies in the

The absolute advantage theory of international trade is associated with

Why are projects with negative net present values (NPVs) unacceptable to a firm?

One similarity between international trade and inter-regional trade is that in general both must overcome

The imposition of an import tariff by a nation usually

According to Heckscher-Ohlin theory as a result of international trade, the difference in factor price between nations

Adam Smith propounded the theory of

Economic Concepts and Theories

Understanding Rent, Capital, and Profits in Economics

Factor and Product Markets, Equilibrium, and Production Factors

Market Equilibrium and Welfare Economics

Welfare Economics and Efficiency Allocation

Key Concepts in Investment and Economic Analysis

International Trade Theory and Practice

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Exam 7: Project Evaluation and International Trade Theories

A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk adjusted rate is

The higher the interest rate

The basis of trade between countries lies in the

The Internal Rate of Return is defined as

In Heckscher-Ohlin model, factor abundance have been defined in two terms. Those are

Heckscher-Ohlin theory of international trade is based on

David Ricardo propounded theory of

The net present value

Trade among different regions within the same country is known as

When using the net present value and the internal rate of return to evaluate capital projects:

The main objective of international trade is

If the internal rate of return (r) is less than the cost of capital,the project should be

Trade between nations occur due to

The basis of trade between countries lies in the

The absolute advantage theory of international trade is associated with

Why are projects with negative net present values (NPVs) unacceptable to a firm?

One similarity between international trade and inter-regional trade is that in general both must overcome

The imposition of an import tariff by a nation usually

According to Heckscher-Ohlin theory as a result of international trade, the difference in factor price between nations

Adam Smith propounded the theory of

Economic Concepts and Theories

Understanding Rent, Capital, and Profits in Economics

Factor and Product Markets, Equilibrium, and Production Factors

Market Equilibrium and Welfare Economics

Welfare Economics and Efficiency Allocation

Key Concepts in Investment and Economic Analysis

International Trade Theory and Practice

Filters