Question 1

A corporation that can source its products in one country, sell them in another country, and raise the funds in a third country

Accepted Answer

A) is a multinational corporation. 
B) is a domestic firm if all of the shareholders are from the same country. 
C) enjoys a built-in hedge against exchange rate risk. 
D) enjoys a built-in hedge against political risk. 
A) is a multinational corporation. 
B) is a domestic firm if all of the shareholders are from the same country. 
C) enjoys a built-in hedge against exchange rate risk. 
D) enjoys a built-in hedge against political risk.

Question 2

A MNC can

Accepted Answer

A) be a factor that increases the opportunities of the citizens of less developed countries. 
B) be a factor that increases the opportunity set of domestic investors. 
C) increase economic efficiency. 
D) all of the above 
A) be a factor that increases the opportunities of the citizens of less developed countries. 
B) be a factor that increases the opportunity set of domestic investors. 
C) increase economic efficiency. 
D) all of the above

Question 3

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.   Under the theory of comparative advantage

Accepted Answer

A) The citizens of country A should make food and trade with the citizens of country B for textiles. 
B) The citizens of country A should make textiles and trade with the citizens of country B for food. 
C) There are no gains from trade in this example. 
D) A is twice as good as B at making food and B is twice as good as A at making textiles. 
A) The citizens of country A should make food and trade with the citizens of country B for textiles. 
B) The citizens of country A should make textiles and trade with the citizens of country B for food. 
C) There are no gains from trade in this example. 
D) A is twice as good as B at making food and B is twice as good as A at making textiles.

Question 4

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

Question 5

A firm with concentrated ownership

Accepted Answer

A) may give rise to conflicts of interest between dominant shareholders and small outside shareholders. 
B) may enjoy more accounting transparency than firms with diffuse ownership structures. 
C) is a partnership, never a corporation. 
D) tends to exist overseas but not in the U.S. 
A) may give rise to conflicts of interest between dominant shareholders and small outside shareholders. 
B) may enjoy more accounting transparency than firms with diffuse ownership structures. 
C) is a partnership, never a corporation. 
D) tends to exist overseas but not in the U.S.

Question 6

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Compute the opportunity cost of producing one additional unit of food instead of textiles.

Accepted Answer

A) 1 yard of textiles per 1.67 pounds of food 
B) 1 pound of food per 1.67 yards of textiles 
C) 1 yard of textiles per .6 pounds of food 
D) 1 pound of food per .6 yards of textiles 
A) 1 yard of textiles per 1.67 pounds of food 
B) 1 pound of food per 1.67 yards of textiles 
C) 1 yard of textiles per .6 pounds of food 
D) 1 pound of food per .6 yards of textiles

Question 7

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso depreciates drastically against the U.S. dollar, as it did in December 1994. This means that

Accepted Answer

A) your company's products can be priced out of the Mexican market, as the peso price of American imports will rise following the peso's fall. 
B) your firm will be able to charge more in dollar terms while keeping peso prices stable. 
C) your domestic competitors will enjoy a period of facing little price competition from Mexican imports. 
D) both b and c are correct 
A) your company's products can be priced out of the Mexican market, as the peso price of American imports will rise following the peso's fall. 
B) your firm will be able to charge more in dollar terms while keeping peso prices stable. 
C) your domestic competitors will enjoy a period of facing little price competition from Mexican imports. 
D) both b and c are correct

Question 8

Since its inception the euro has brought about revolutionary changes in European finance. For example,

Accepted Answer

A) by redenominating corporate bonds and stocks from several different currencies into one common currency, the euro has precipitated the emergence of continent wide capital markets in Europe that are comparable to U.S. markets in depth and liquidity. 
B) Swiss bank accounts are all denominated in euro. 
C) the European banking sector has become much more important as a source of financing for European firms. 
D) there have actually not been any revolutionary changes. 
A) by redenominating corporate bonds and stocks from several different currencies into one common currency, the euro has precipitated the emergence of continent wide capital markets in Europe that are comparable to U.S. markets in depth and liquidity. 
B) Swiss bank accounts are all denominated in euro. 
C) the European banking sector has become much more important as a source of financing for European firms. 
D) there have actually not been any revolutionary changes.

Question 9

Although the world economy is much more integrated today than was the case 10 or 20 years ago, a variety of barriers still hamper free movements of people, goods, services, and capital across national boundaries. These barriers include

Accepted Answer

A) legal restrictions. 
B) excessive transportation costs. 
C) information asymmetry. 
D) all of the above 
A) legal restrictions. 
B) excessive transportation costs. 
C) information asymmetry. 
D) all of the above

Question 10

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Country B can produce 8 yards of textiles or 5 pounds of food per unit of input.

Accepted Answer

A) Country A is relatively more efficient than Country B in the production of food. 
B) Country B is relatively more efficient than Country A in the production of textiles. 
C) Country A has an absolute advantage over Country B in the production of food and textiles. 
D) Answers b and c are both correct 
A) Country A is relatively more efficient than Country B in the production of food. 
B) Country B is relatively more efficient than Country A in the production of textiles. 
C) Country A has an absolute advantage over Country B in the production of food and textiles. 
D) Answers b and c are both correct

Question 11

What is the relative price of wheat in North Dakota prior to trade in Case II?

Accepted Answer

A) 2 bushels of wheat = ½ bottle of beer 
B) ½ bushel of wheat = 2 bottles of beer 
C) 1 bushel of wheat = ½ bottle of beer 
D) 1 bushel of wheat = 2 bottles of beer 
A) 2 bushels of wheat = ½ bottle of beer 
B) ½ bushel of wheat = 2 bottles of beer 
C) 1 bushel of wheat = ½ bottle of beer 
D) 1 bushel of wheat = 2 bottles of beer

Question 12

Suppose that trade occurs. Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey. What is the international price of beer?

Accepted Answer

A) 1 bottle of whiskey = 1 keg of beer 
B) 3 bottles of whiskey = 1 keg of beer 
C) 2/3 bottle of whiskey = 1 keg of beer 
D) 1 bottle of whiskey = 3 kegs of beer 
A) 1 bottle of whiskey = 1 keg of beer 
B) 3 bottles of whiskey = 1 keg of beer 
C) 2/3 bottle of whiskey = 1 keg of beer 
D) 1 bottle of whiskey = 3 kegs of beer

Question 13

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 14

Since the end of World War I, the dominant global currency has been the

Accepted Answer

A) British pound. 
B) Japanese yen. 
C) Euro. 
D) U.S. dollar. 
A) British pound. 
B) Japanese yen. 
C) Euro. 
D) U.S. dollar.

Question 15

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) 3 bottles of whiskey = 1 keg of beer 
A) 2 bottles of whiskey = 3 kegs of beer 
B) 5 bottles of whiskey = 12 kegs of beer 
C) 3 bottles of whiskey = 1 keg of beer

Question 16

Privatization

Accepted Answer

A) has spurred a tremendous increase in cross-border investment. 
B) has allowed many governments to have the funds to nationalize important industries. 
C) has guaranteed that new ownership will be limited to the local citizens. 
D) has generally decreased the efficiency of the enterprise. 
A) has spurred a tremendous increase in cross-border investment. 
B) has allowed many governments to have the funds to nationalize important industries. 
C) has guaranteed that new ownership will be limited to the local citizens. 
D) has generally decreased the efficiency of the enterprise.

Question 17

What is the relative price of a gun in terms of butter in South 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

Question 18

Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If the British pound depreciates against the U.S. dollar,

Accepted Answer

A) your firm will be able to charge more in dollar terms while keeping pound prices stable. 
B) your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise. 
C) to protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price the same. 
D) both b and c are correct 
A) your firm will be able to charge more in dollar terms while keeping pound prices stable. 
B) your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise. 
C) to protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price the same. 
D) both b and c are correct

Question 19

Suppose that country A is twice as good at producing widgets as country B. If the currency of B is twice as valuable as the currency of A,

Accepted Answer

A)  the comparative advantage will be canceled out. 
B)  trade will be an improved outcome for both A and B. 
C)  the comparative advantage could possible be canceled out depending on how much it costs to produce the widget in country B. 
D)  none of the above 
A)  the comparative advantage will be canceled out. 
B)  trade will be an improved outcome for both A and B. 
C)  the comparative advantage could possible be canceled out depending on how much it costs to produce the widget in country B. 
D)  none of the above

Question 20

Consider the no-trade input/output situation presented in the following table and graph for countries A and

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. 
B)  Assuming that free trade is legal; develop a scenario that will benefit the citizens of both countries.     
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. 
B)  Assuming that free trade is legal; develop a scenario that will benefit the citizens of both countries.     
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 corporation that can source its products in one country, sell them in another country, and raise the funds in a third country

A MNC can

What major dimension sets apart international finance from domestic finance?

A firm with concentrated ownership

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Compute the opportunity cost of producing one additional unit of food instead of textiles.

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso depreciates drastically against the U.S. dollar, as it did in December 1994. This means that

Since its inception the euro has brought about revolutionary changes in European finance. For example,

Although the world economy is much more integrated today than was the case 10 or 20 years ago, a variety of barriers still hamper free movements of people, goods, services, and capital across national boundaries. These barriers include

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Country B can produce 8 yards of textiles or 5 pounds of food per unit of input.

What is the relative price of wheat in North Dakota prior to trade in Case II?

Suppose that trade occurs. Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey. What is the international price of beer?

Since the end of World War I, the dominant global currency has been the

What is the price of beer without trade in Northern Ireland?

Privatization

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

Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If the British pound depreciates against the U.S. dollar,

Suppose that country A is twice as good at producing widgets as country B. If the currency of B is twice as valuable as the currency of A,

Consider the no-trade input/output situation presented in the following table and graph for countries A and

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

A corporation that can source its products in one country, sell them in another country, and raise the funds in a third country

A MNC can

What major dimension sets apart international finance from domestic finance?

A firm with concentrated ownership

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Compute the opportunity cost of producing one additional unit of food instead of textiles.

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso depreciates drastically against the U.S. dollar, as it did in December 1994. This means that

Since its inception the euro has brought about revolutionary changes in European finance. For example,

Although the world economy is much more integrated today than was the case 10 or 20 years ago, a variety of barriers still hamper free movements of people, goods, services, and capital across national boundaries. These barriers include

Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Country B can produce 8 yards of textiles or 5 pounds of food per unit of input.

What is the relative price of wheat in North Dakota prior to trade in Case II?

Suppose that trade occurs. Each country completely specializes and 500 kegs of beer are traded for 500 bottles of whiskey. What is the international price of beer?

Since the end of World War I, the dominant global currency has been the

What is the price of beer without trade in Northern Ireland?

Privatization

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

Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If the British pound depreciates against the U.S. dollar,

Suppose that country A is twice as good at producing widgets as country B. If the currency of B is twice as valuable as the currency of A,

Consider the no-trade input/output situation presented in the following table and graph for countries A and

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