Question 1

Comparative advantage was once the cornerstone of international trade theory, but today it is archaic, simplistic, and irrelevant for explaining investment choices made by MNEs.

Accepted Answer

A) True 
 B)False

Question 2

Comparative advantage is one of the underlying principles driving the growth of global business.

Accepted Answer

A) True 
 B)False

Question 3

A firm in the International Trade Phase of Globalization:

Accepted Answer

A) makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units. 
B) receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units. 
C) bears direct foreign exchange risk. 
D) none of the above

Question 4

The authors describe a process for development of a MNE that begins with a purely domestic phase, followed by the multinational phase, and topping out with the international trade phase.

Accepted Answer

A) True 
 B)False

Question 5

Typically, a firm in its domestic stage of globalization has all financial transactions in its domestic currency.

Accepted Answer

A) True 
 B)False

Question 6

A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

Accepted Answer

A) an open market place 
B) high quality strategic management 
C) access to capital 
D) none of the above

Question 7

Which of the following factors of production DO NOT flow freely between countries?

Accepted Answer

A) raw materials 
B) financial capital 
C) (non-military)technology 
D) All of the above factors of production flow freely among countries.

Question 8

The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:

Accepted Answer

A) domestic phase. 
B) multinational phase. 
C) international trade phase. 
D) import-export banking phase.

Question 9

A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

Accepted Answer

A) an open marketplace 
B) high-quality strategic management 
C) access to capital 
D) access to qualified labor pool

Question 10

Because countries have different financial regulations and customs, it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

Accepted Answer

A) True 
 B)False

Question 11

International trade might have approached the comparative advantage model in the 19th century, and it does so even more today.

Accepted Answer

A) True 
 B)False

Question 12

Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

Accepted Answer

A) True 
 B)False

Question 13

________ investments are designed to promote and enhance the growth and profitability of the firm. ________ investments are designed to deny those same opportunities to the firm's competitors.

Accepted Answer

A) Conservative; Aggressive 
B) Defensive; Proactive 
C) Proactive; Defensive 
D) Aggressive; Proactive

Question 14

The authors describe the multinational phase of globalization for a firm as one characterized by the:

Accepted Answer

A) ownership of assets and enterprises in foreign countries. 
B) potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars. 
C) imports from foreign suppliers and exports to foreign buyers. 
D) requirement that all employees be multilingual.

Question 15

A eurodollar deposit is a demand deposit.

Accepted Answer

A) True 
 B)False

Question 16

A number of financial instruments that are used in domestic financial management have been modified for use in international financial management. Examples are foreign currency options and futures, interest rate and currency swaps, and letters of credit.

Accepted Answer

A) True 
 B)False

Question 17

The actions of corporate insiders and the actions of rulers of sovereign states are both agency costs that act as an impediment to the growth of globalization.

Accepted Answer

A) True 
 B)False

Question 18

The Eurocurrency market continues to thrive because it is a large international money market relatively free from governmental regulation and interference. Recent events may lead to greater regulation.

Accepted Answer

A) True 
 B)False

Question 19

The theory that suggests specialization by country can increase worldwide production is:

Accepted Answer

A) the theory of comparative advantage. 
B) the theory of foreign direct investment. 
C) the international Fisher effect. 
D) the theory of working capital management.

Question 20

Eurocurrencies are domestic currencies of one country on deposit in a second country.

Accepted Answer

A) True 
 B)False

Exam 1: Current Multinational Challenges and the Global Economy

Comparative advantage was once the cornerstone of international trade theory, but today it is archaic, simplistic, and irrelevant for explaining investment choices made by MNEs.

Comparative advantage is one of the underlying principles driving the growth of global business.

A firm in the International Trade Phase of Globalization:

The authors describe a process for development of a MNE that begins with a purely domestic phase, followed by the multinational phase, and topping out with the international trade phase.

Typically, a firm in its domestic stage of globalization has all financial transactions in its domestic currency.

A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

Which of the following factors of production DO NOT flow freely between countries?

The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:

A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

Because countries have different financial regulations and customs, it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

International trade might have approached the comparative advantage model in the 19th century, and it does so even more today.

Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

investments are designed to promote and enhance the growth and profitability of the firm. investments are designed to deny those same opportunities to the firm's competitors.

The authors describe the multinational phase of globalization for a firm as one characterized by the:

A eurodollar deposit is a demand deposit.

A number of financial instruments that are used in domestic financial management have been modified for use in international financial management. Examples are foreign currency options and futures, interest rate and currency swaps, and letters of credit.

The actions of corporate insiders and the actions of rulers of sovereign states are both agency costs that act as an impediment to the growth of globalization.

The Eurocurrency market continues to thrive because it is a large international money market relatively free from governmental regulation and interference. Recent events may lead to greater regulation.

The theory that suggests specialization by country can increase worldwide production is:

Eurocurrencies are domestic currencies of one country on deposit in a second country.