Question 1

The Japanese automobile company Honda decided to establish production facilities in Ohio, mainly to

Accepted Answer

A) circumvent trade barriers. 
B) reduce transportation costs. 
C) reduce transactions costs. 
D) both a and b 
A) circumvent trade barriers. 
B) reduce transportation costs. 
C) reduce transactions costs. 
D) both a and b

Question 2

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) none of the above 
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) none of the above

Question 3

Consider a dentist and a 14-year old boy. The dentist can make $100 per hour drilling teeth and the 14-year old boy can make $2 per hour picking up used aluminum cans. The dentist is a manly man and can mow his half-acre lot in one hour. The 14-year old boy can mow the lawn in two hours. If the dentist hires the boy to mow his lawn at any price less than $100, but more than $4

Accepted Answer

A) both he and the boy are better off. 
B) the dentist would be exploiting the boy. 
C) the boy would be exploiting the dentist. 
D) all of the above 
A) both he and the boy are better off. 
B) the dentist would be exploiting the boy. 
C) the boy would be exploiting the dentist. 
D) all of the above

Question 4

As capital markets are becoming more integrated, the goal of shareholder wealth maximization

Accepted Answer

A) has been altered to include other goals as well. 
B) has lost out to other goals, even in the U.S. 
C) has been given increasing importance by managers in Europe. 
D) has been shown to be a deterrent to raising funds abroad. 
A) has been altered to include other goals as well. 
B) has lost out to other goals, even in the U.S. 
C) has been given increasing importance by managers in Europe. 
D) has been shown to be a deterrent to raising funds abroad.

Question 5

A true MNC, with operations in dozens of different countries

Accepted Answer

A) must effectively manage foreign exchange risk. 
B) can ignore foreign exchange risk since it is diversified. 
C) will pay taxes in only its home county. 
D) none of the above 
A) must effectively manage foreign exchange risk. 
B) can ignore foreign exchange risk since it is diversified. 
C) will pay taxes in only its home county. 
D) none of the above

Question 6

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 7

If the international price of beer is one keg of beer = 1 bottle of whiskey, how much whiskey will Northern Ireland consume? Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey.

Accepted Answer

A) 1,000 bottles 
B) 1,200 bottles 
C) 500 bottles 
D) 600 bottles 
A) 1,000 bottles 
B) 1,200 bottles 
C) 500 bottles 
D) 600 bottles

Question 8

Which state has an absolute advantage in producing beer in Case II?

Accepted Answer

A) South Dakota 
B) North Dakota 
C) Neither state 
A) South Dakota 
B) North Dakota 
C) Neither state

Question 9

Nestlé, a well-known Swiss corporation,

Accepted Answer

A) has been a paragon of virtue in its opposition to all forms of political risk. 
B) at one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, the total market value of the firm fell. 
C) at one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, there was a major transfer of wealth from foreign shareholders to Swiss shareholders. 
D) none of the above 
A) has been a paragon of virtue in its opposition to all forms of political risk. 
B) at one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, the total market value of the firm fell. 
C) at one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, there was a major transfer of wealth from foreign shareholders to Swiss shareholders. 
D) none of the above

Question 10

Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is $1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firm's assets paying only €80,000 in compensation. This is an example of

Accepted Answer

A) exchange rate risk. 
B) political risk. 
C) market imperfections. 
D) none of the above, since $100,000 = €80,000 × $1.25/€1.00 
A) exchange rate risk. 
B) political risk. 
C) market imperfections. 
D) none of the above, since $100,000 = €80,000 × $1.25/€1.00

Question 11

The gains from trade

Accepted Answer

A) are likely realized in the long run when workers and firms have had the time to adjust to the new competitive environment. 
B) are immediately realized in the short run, when governments drop protectionist policies. 
C) are smaller than the costs of adjustment. 
D) none of the above 
A) are likely realized in the long run when workers and firms have had the time to adjust to the new competitive environment. 
B) are immediately realized in the short run, when governments drop protectionist policies. 
C) are smaller than the costs of adjustment. 
D) none of the above

Question 12

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 that 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 that has production and sales operations in several other countries.

Question 13

When corporate governance breaks down

Accepted Answer

A) shareholders are unlikely to receive fair returns on their investments. 
B) managers may be tempted to enrich themselves at shareholder expense. 
C) the board of directors is not doing its job. 
D) all of the above 
A) shareholders are unlikely to receive fair returns on their investments. 
B) managers may be tempted to enrich themselves at shareholder expense. 
C) the board of directors is not doing its job. 
D) all of the above

Question 14

Now suppose that Southern workers are paid €1 per day but the Northern workers receive a raise to £2 per day. Will trade be possible at the exchange rate you found in the question before the last question?

Accepted Answer

A) Yes 
B) No 
A) Yes 
B) No

Question 15

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

Question 16

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 17

If one country is twice the size of another country and is better at making almost everything than the benighted citizens of the smaller county,

Accepted Answer

A) the bigger county enjoys an absolute advantage. 
B) the bigger county enjoys an relative advantage. 
C) the bigger county enjoys an comparative advantage. 
D) there is not enough information to make a determination. 
A) the bigger county enjoys an absolute advantage. 
B) the bigger county enjoys an relative advantage. 
C) the bigger county enjoys an comparative advantage. 
D) there is not enough information to make a determination.

Question 18

Recently, financial markets have become highly integrated. This development

Accepted Answer

A) allows investors to diversify their portfolios internationally. 
B) allows minority investors to buy and sell stocks. 
C) has increased the cost of capital for firms. 
D) answers a and c are both correct. 
A) allows investors to diversify their portfolios internationally. 
B) allows minority investors to buy and sell stocks. 
C) has increased the cost of capital for firms. 
D) answers a and c are both correct.

Question 19

Production of goods and services has become globalized to a large extent as a result of

Accepted Answer

A) natural resources being depleted in one country after another. 
B) skilled labor being highly mobile. 
C) multinational corporations' efforts to source inputs and locate production anywhere where costs are lower and profits higher. 
D) common tastes worldwide for the same goods and services. 
A) natural resources being depleted in one country after another. 
B) skilled labor being highly mobile. 
C) multinational corporations' efforts to source inputs and locate production anywhere where costs are lower and profits higher. 
D) common tastes worldwide for the same goods and services.

Question 20

What is the relative price of a gun in terms of butter in North Carolina?

Accepted Answer

A) 1 gun costs 3 butters 
B) 3 guns costs 1 butter 
C) 1 gun costs 2 butters 
D) 2 guns costs 1 butter 
A) 1 gun costs 3 butters 
B) 3 guns costs 1 butter 
C) 1 gun costs 2 butters 
D) 2 guns costs 1 butter

The Japanese automobile company Honda decided to establish production facilities in Ohio, mainly to

International trade is

As capital markets are becoming more integrated, the goal of shareholder wealth maximization

A true MNC, with operations in dozens of different countries

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

If the international price of beer is one keg of beer = 1 bottle of whiskey, how much whiskey will Northern Ireland consume? Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey.

Which state has an absolute advantage in producing beer in Case II?

Nestlé, a well-known Swiss corporation,

Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is $1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firm's assets paying only €80,000 in compensation. This is an example of

The gains from trade

A multinational firm can be defined as a firm that

When corporate governance breaks down

Now suppose that Southern workers are paid €1 per day but the Northern workers receive a raise to £2 per day. Will trade be possible at the exchange rate you found in the question before the last question?

An example of a political risk is

The owners of a business are the

If one country is twice the size of another country and is better at making almost everything than the benighted citizens of the smaller county,

Recently, financial markets have become highly integrated. This development

Production of goods and services has become globalized to a large extent as a result of

What is the relative price of a gun in terms of butter in North Carolina?

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

Exam 1: Globalization and the Multinational Firm

The Japanese automobile company Honda decided to establish production facilities in Ohio, mainly to

International trade is

As capital markets are becoming more integrated, the goal of shareholder wealth maximization

A true MNC, with operations in dozens of different countries

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

If the international price of beer is one keg of beer = 1 bottle of whiskey, how much whiskey will Northern Ireland consume? Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey.

Which state has an absolute advantage in producing beer in Case II?

Nestlé, a well-known Swiss corporation,

Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is $1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firm's assets paying only €80,000 in compensation. This is an example of

The gains from trade

A multinational firm can be defined as a firm that

When corporate governance breaks down

Now suppose that Southern workers are paid €1 per day but the Northern workers receive a raise to £2 per day. Will trade be possible at the exchange rate you found in the question before the last question?

An example of a political risk is

The owners of a business are the

If one country is twice the size of another country and is better at making almost everything than the benighted citizens of the smaller county,

Recently, financial markets have become highly integrated. This development

Production of goods and services has become globalized to a large extent as a result of

What is the relative price of a gun in terms of butter in North Carolina?

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