Question 1

The theory of comparative advantage

Accepted Answer

A) claims that economic well-being is enhanced if each country's citizens produce only a single product. 
B) claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries. 
C) claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries,and then trade production. 
D) claims that no country has an absolute advantage over another country in the production of any good or service. 
A) claims that economic well-being is enhanced if each country's citizens produce only a single product. 
B) claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries. 
C) claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries,and then trade production. 
D) claims that no country has an absolute advantage over another country in the production of any good or service.

Question 2

A purely domestic firm that sources its products,sells its products,and raises its funds domestically

Accepted Answer

A) can face stiff competition from a multinational corporation that can source its products in one country,sell them in several countries,and raise its funds in a third country. 
B) can be more competitive than an MNC on its home turf due to superior knowledge of the local market. 
C) can still face exchange rate risk,just like an MNC. 
D) all of the options 
A) can face stiff competition from a multinational corporation that can source its products in one country,sell them in several countries,and raise its funds in a third country. 
B) can be more competitive than an MNC on its home turf due to superior knowledge of the local market. 
C) can still face exchange rate risk,just like an MNC. 
D) all of the options

Question 3

What major dimension sets apart international finance from domestic finance?

Accepted Answer

A) Foreign exchange and political risks 
B) Market imperfections 
C) Expanded opportunity set 
D) all of the options 
A) Foreign exchange and political risks 
B) Market imperfections 
C) Expanded opportunity set 
D) all of the options

Question 4

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment-

Accepted Answer

A) are still inherently local. 
B) are still regional in nature. 
C) are slowly becoming globalized. 
D) are highly globalized. 
A) are still inherently local. 
B) are still regional in nature. 
C) are slowly becoming globalized. 
D) are highly globalized.

Question 5

Counties A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another.The citizens of country A have to give up one unit of food to gain two units of textiles,while the citizens of country B have to give up one unit of textiles to gain two units of food.Their production possibilities curves are shown.   Under the theory of comparative advantage,if free trade is allowed,the market clearing price (or exchange rate,if you will)between food and textiles will be

Accepted Answer

A) one unit of food for one unit of textiles. 
B) somewhere between one unit of food for two units of textiles and two units of food for one unit of textiles. 
C) one unit of food for two units of textiles. 
D) two units of food for one unit of textiles. 
A) one unit of food for one unit of textiles. 
B) somewhere between one unit of food for two units of textiles and two units of food for one unit of textiles. 
C) one unit of food for two units of textiles. 
D) two units of food for one unit of textiles.

Question 6

The first two columns give the maximum daily amounts of beer and whiskey that Southern Ireland and Northern Ireland can produce when they completely specialize in one or another product.The last two columns give each country's consumption without trade. $$\begin{array} { l c c c c c c } 
& \begin{array} { c } 
\text { Maxirnumn } \
\text { beer } \
\text { production }
\end{array} & \begin{array} { c } 
\text { Maxirnum } \
\text { whiskey } \
\text { production }
\end{array} & \begin{array} { c } 
\text { Beer consumption } \
\text { without trade }
\end{array} & \begin{array} { c } 
\text { Beer consurnption } \
\text { without trade }
\end{array} \
\begin{array} { l } 
\text { Northem } \
\text { Irelard } \
\text { Southem }
\end{array} & 500 \mathrm { kegs } & 1500 \mathrm { kegs } & 300\mathrm { kegs } & 600 \text { bottles } \
\text { Ireland } & 1200 \mathrm { kegs } & \mathbf { 8 0 0 } \mathrm { kegs } & 600  \mathrm { kegs } & 400 \text { bottles }
\end{array}$$ What is the cost of Northern Ireland producing one additional bottle of whiskey?

Accepted Answer

A) 0.33 kegs of beer 
B) 0.66 kegs of beer 
C) 1 kegs of beer 
D) 3 kegs of beer 
A) 0.33 kegs of beer 
B) 0.66 kegs of beer 
C) 1 kegs of beer 
D) 3 kegs of beer

Question 7

The owners of a business are the

Accepted Answer

A) taxpayers. 
B) workers. 
C) suppliers. 
D) shareholders. 
A) taxpayers. 
B) workers. 
C) suppliers. 
D) shareholders.

Question 8

In countries like France and Germany,

Accepted Answer

A) managers have often made business decisions with regard to maximizing market share to the exclusion of other goals. 
B) managers have often viewed shareholders as one of the "stakeholders" of the firm,others being employees,customers,suppliers,banks and so forth. 
C) managers have often regarded the prosperity and growth of their combines,or families of related firms,as their most critical goal. 
D) managers have traditionally embraced the maximization of shareholder wealth as the only worthy goal. 
A) managers have often made business decisions with regard to maximizing market share to the exclusion of other goals. 
B) managers have often viewed shareholders as one of the "stakeholders" of the firm,others being employees,customers,suppliers,banks and so forth. 
C) managers have often regarded the prosperity and growth of their combines,or families of related firms,as their most critical goal. 
D) managers have traditionally embraced the maximization of shareholder wealth as the only worthy goal.

Question 9

In modern times,it is not a country per se but rather a controller of capital and know-how that gives the country in which it is domiciled a comparative advantage over another country.These controllers of capital and technology are

Accepted Answer

A) the state. 
B) the multinational corporations (MNCs). 
C) portfolio managers of international mutual funds. 
D) none of the options 
A) the state. 
B) the multinational corporations (MNCs). 
C) portfolio managers of international mutual funds. 
D) none of the options

Question 10

International trade is

Accepted Answer

A) a "zero-sum" game in which one country benefits at the expense of another country. 
B) an "increasing-sum" game at which all players become winners. 
C) prone to both countries being worse off than had they not participated in international trade. 
D) none of the options 
A) a "zero-sum" game in which one country benefits at the expense of another country. 
B) an "increasing-sum" game at which all players become winners. 
C) prone to both countries being worse off than had they not participated in international trade. 
D) none of the options

Question 11

The common monetary policy for the euro zone is now formulated by

Accepted Answer

A) the Bundesbank in Germany. 
B) the Federal Reserve Bank. 
C) the World Bank. 
D) the European Central Bank. 
A) the Bundesbank in Germany. 
B) the Federal Reserve Bank. 
C) the World Bank. 
D) the European Central Bank.

Question 12

The first two columns give the maximum daily amounts of beer and whiskey that Southern Ireland and Northern Ireland can produce when they completely specialize in one or another product.The last two columns give each country's consumption without trade. $$\begin{array} { l c c c c c c } 
& \begin{array} { c } 
\text { Maxirnumn } \
\text { beer } \
\text { production }
\end{array} & \begin{array} { c } 
\text { Maxirnum } \
\text { whiskey } \
\text { production }
\end{array} & \begin{array} { c } 
\text { Beer consumption } \
\text { without trade }
\end{array} & \begin{array} { c } 
\text { Beer consurnption } \
\text { without trade }
\end{array} \
\begin{array} { l } 
\text { Northem } \
\text { Irelard } \
\text { Southem }
\end{array} & 500 \mathrm { kegs } & 1500 \mathrm { kegs } & 300 \mathrm { kegs } & 600 \text { bottles } \
\text { Ireland } & 1200 \mathrm { kegs } & \mathbf { 8 0 0 } \mathrm { kegs } & 600 \mathrm { kegs } & 400 \text { bottles }
\end{array}$$ What is the price of beer without trade in Northern Ireland?

Accepted Answer

A) 2 bottles of whiskey = 3 kegs of beer 
B) 5 bottles of whiskey = 12 kegs of beer 
C) 2 bottles of whiskey = 1 keg of beer 
D) none of the options 
A) 2 bottles of whiskey = 3 kegs of beer 
B) 5 bottles of whiskey = 12 kegs of beer 
C) 2 bottles of whiskey = 1 keg of beer 
D) none of the options

Question 13

The Nestlé Corporation,a well-known Swiss MNC,used to issue two different classes of common stock,bearer shares and registered shares,and foreigners were allowed to hold only

Accepted Answer

A) registered shares. 
B) bearer shares. 
C) voting shares. 
D) convertible shares. 
A) registered shares. 
B) bearer shares. 
C) voting shares. 
D) convertible shares.

Question 14

Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day.Southern workers are paid €1 per day and Northern workers are paid £1 per day.What is the approximate exchange rate associated with an international price of one keg of beer = 1 bottle of whiskey?

Accepted Answer

A) €1.14 = £1 
B) €0.80 = £1 
C) €1 = £1 
D) none of the options 
A) €1.14 = £1 
B) €0.80 = £1 
C) €1 = £1 
D) none of the options

Question 15

A multinational firm can be defined as a firm that

Accepted Answer

A) invests short-term cash inflows in more than one currency. 
B) has sales affiliates in several countries. 
C) is incorporated in more than one country. 
D) incorporated in one country and has production and sales operations in several other countries. 
A) invests short-term cash inflows in more than one currency. 
B) has sales affiliates in several countries. 
C) is incorporated in more than one country. 
D) incorporated in one country and has production and sales operations in several other countries.

Question 16

Countries A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another.The citizens of country A have to give up one unit of food to gain two units of textiles,while the citizens of country B have to give up one unit of textiles to gain two units of food.Their production possibilities curves are shown.   Suppose that trade is allowed and that the international exchange rate between food and textiles is one-for-one.The increased consumption following trade will be

Accepted Answer

A) an increase of 400 units of food and 400 units of textiles. 
B) an increase of 1,200 units of food and 1,200 units of textiles. 
C) an increase of 800 units of food and 800 units of textiles. 
D) there are no gains from trade in this example. 
A) an increase of 400 units of food and 400 units of textiles. 
B) an increase of 1,200 units of food and 1,200 units of textiles. 
C) an increase of 800 units of food and 800 units of textiles. 
D) there are no gains from trade in this example.

Question 17

Consider the no-trade input/output situation presented in the following table and graph for countries A and B.Assuming that free trade is legal; develop a scenario that will benefit the citizens of both countries. 
Input/Output without Trade
                           country                            A        B       totoal               I. total potintal output                                    (lbs. or yard; 000,000s)                                    food        600       500       1,100               textiles       1,200       500       1,700               II. consumption                                     (lbs. or yard; 000,000s)                                     food       300       400       700                textiles       200       400       600

Accepted Answer

A) Country B should make all the textiles and trade with Country A for food. 
B) Country A should make nothing but textiles and trade with Country B for food. 
C) Country B should make all the textiles and Country A should make all the food. 
D) Country B should make nothing but textiles and trade with Country A for food. 
A) Country B should make all the textiles and trade with Country A for food. 
B) Country A should make nothing but textiles and trade with Country B for food. 
C) Country B should make all the textiles and Country A should make all the food. 
D) Country B should make nothing but textiles and trade with Country A for food.

Question 18

The ultimate guardians of shareholder interest in a corporation are the

Accepted Answer

A) rank and file workers. 
B) senior management. 
C) boards of directors. 
D) all of the options 
A) rank and file workers. 
B) senior management. 
C) boards of directors. 
D) all of the options

Question 19

An example of a political risk is

Accepted Answer

A) expropriation of assets. 
B) adverse change in tax rules. 
C) the opposition party being elected. 
D) both the expropriation of assets and adverse changes in tax rules are correct. 
A) expropriation of assets. 
B) adverse change in tax rules. 
C) the opposition party being elected. 
D) both the expropriation of assets and adverse changes in tax rules are correct.

Question 20

A country like North Korea

Accepted Answer

A) likely rejects the notion of increased opportunity presented by free trade. 
B) engages in free trade. 
C) lies on a production possibilities curve superior to South Korea,since North Korea protects its international producers. 
D) none of the options 
A) likely rejects the notion of increased opportunity presented by free trade. 
B) engages in free trade. 
C) lies on a production possibilities curve superior to South Korea,since North Korea protects its international producers. 
D) none of the options

The theory of comparative advantage

A purely domestic firm that sources its products,sells its products,and raises its funds domestically

What major dimension sets apart international finance from domestic finance?

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment-

The owners of a business are the

In countries like France and Germany,

In modern times,it is not a country per se but rather a controller of capital and know-how that gives the country in which it is domiciled a comparative advantage over another country.These controllers of capital and technology are

International trade is

The common monetary policy for the euro zone is now formulated by

The Nestlé Corporation,a well-known Swiss MNC,used to issue two different classes of common stock,bearer shares and registered shares,and foreigners were allowed to hold only

Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day.Southern workers are paid €1 per day and Northern workers are paid £1 per day.What is the approximate exchange rate associated with an international price of one keg of beer = 1 bottle of whiskey?

A multinational firm can be defined as a firm that

The ultimate guardians of shareholder interest in a corporation are the

An example of a political risk is

A country like North Korea

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

		country
	A	B	totoal
I. total potintal output
(lbs. or yard; 000,000s)
food	600	500	1,100
textiles	1,200	500	1,700
II. consumption
(lbs. or yard; 000,000s)
food	300	400	700
textiles	200	400	600

Exam 2: Globalization and the Multinational Firm

The theory of comparative advantage

A purely domestic firm that sources its products,sells its products,and raises its funds domestically

What major dimension sets apart international finance from domestic finance?

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment-

The owners of a business are the

In countries like France and Germany,

In modern times,it is not a country per se but rather a controller of capital and know-how that gives the country in which it is domiciled a comparative advantage over another country.These controllers of capital and technology are

International trade is

The common monetary policy for the euro zone is now formulated by

The Nestlé Corporation,a well-known Swiss MNC,used to issue two different classes of common stock,bearer shares and registered shares,and foreigners were allowed to hold only

Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day.Southern workers are paid €1 per day and Northern workers are paid £1 per day.What is the approximate exchange rate associated with an international price of one keg of beer = 1 bottle of whiskey?

A multinational firm can be defined as a firm that

The ultimate guardians of shareholder interest in a corporation are the

An example of a political risk is

A country like North Korea

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters