Question 1

The product life-cycle theory predicts that

Accepted Answer

A) over time the United States switches from an exporting country of new products to an importing country. 
B) over time the United States switches from a comparative advantage in R&D to a service economy. 
C) over time the United States education system maintains the country's dominant position in the world economy. 
D) none of the above 
A) over time the United States switches from an exporting country of new products to an importing country. 
B) over time the United States switches from a comparative advantage in R&D to a service economy. 
C) over time the United States education system maintains the country's dominant position in the world economy. 
D) none of the above

Question 2

Once a MNC decides to undertake a foreign project,it can take various measures to minimize its exposure to political risk.These include

Accepted Answer

A) the MNC can form a joint venture with a local company. 
B) the MNC may also consider forming a consortium of international companies to undertake the foreign project. 
C) the MNC can use local debt to finance the foreign project. 
D) the MNC may purchase insurance against the hazard of political risk. 
E) all of the above 
A) the MNC can form a joint venture with a local company. 
B) the MNC may also consider forming a consortium of international companies to undertake the foreign project. 
C) the MNC can use local debt to finance the foreign project. 
D) the MNC may purchase insurance against the hazard of political risk. 
E) all of the above

Question 3

A classic example for trade barrier-motivated FDI is

Accepted Answer

A) Honda's investment in Ohio. 
B) Bridgestone's investment in Japan. 
C) NAFTA. 
D) None of the above 
A) Honda's investment in Ohio. 
B) Bridgestone's investment in Japan. 
C) NAFTA. 
D) None of the above

Question 4

Examples of transfer risk include

Accepted Answer

A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above 
A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above

Question 5

The dominant source of FDI outflows

Accepted Answer

A) several developed countries. 
B) a few underdeveloped countries next to wealthy neighbors, like Mexico. 
C) Africa and China. 
D) none of the above 
A) several developed countries. 
B) a few underdeveloped countries next to wealthy neighbors, like Mexico. 
C) Africa and China. 
D) none of the above

Question 6

Considering the fact that many barriers to international portfolio investments have been dismantled in recent years,

Accepted Answer

A) capital market imperfections as a motivating factor for FDI are likely to become more important going forward. 
B) capital market imperfections as a motivating factor for FDI are likely to become less relevant. 
C) labor market imperfections as a motivating factor for FDI are likely to become less relevant. 
D) none of the above 
A) capital market imperfections as a motivating factor for FDI are likely to become more important going forward. 
B) capital market imperfections as a motivating factor for FDI are likely to become less relevant. 
C) labor market imperfections as a motivating factor for FDI are likely to become less relevant. 
D) none of the above

Question 7

FDI stocks

Accepted Answer

A) are the common shares of multinational companies that invest abroad. 
B) are mutual funds that invest in FDI. 
C) represent the accumulation of previous years' FDI flows. 
D) at the sum total of current year FDI flows. 
A) are the common shares of multinational companies that invest abroad. 
B) are mutual funds that invest in FDI. 
C) represent the accumulation of previous years' FDI flows. 
D) at the sum total of current year FDI flows.

Question 8

The boomerang effect

Accepted Answer

A) the possibility that if the secret formula of Coca-Cola were leaked, that other firms would come up with similar products and hurt Coca-Cola's sales. 
B) the possibility that FDI in an undeveloped nation will lead to a group of workers who have enough money to afford the firm's products, leading to an increase of sales and increase of workers and so on. 
C) the possibility that FDI in an undeveloped nation will lead to a group of domestic workers no longer have enough money to afford the firm's products, leading to an decrease of sales. 
D) none of the above 
A) the possibility that if the secret formula of Coca-Cola were leaked, that other firms would come up with similar products and hurt Coca-Cola's sales. 
B) the possibility that FDI in an undeveloped nation will lead to a group of workers who have enough money to afford the firm's products, leading to an increase of sales and increase of workers and so on. 
C) the possibility that FDI in an undeveloped nation will lead to a group of domestic workers no longer have enough money to afford the firm's products, leading to an decrease of sales. 
D) none of the above

Question 9

In evaluating political risk,experts focus their attention on a set of key factors such as

Accepted Answer

A) integration of the host country into the world political/economic system. 
B) the host country's ethnic and religious stability. 
C) the host country's regional security, and key economic indicators. 
D) all of the above 
A) integration of the host country into the world political/economic system. 
B) the host country's ethnic and religious stability. 
C) the host country's regional security, and key economic indicators. 
D) all of the above

Question 10

Synergistic gains refers to:

Accepted Answer

A) gains from hedging. 
B) gains obtained when the value of the acquiring and target firms, combined together, is greater than the stand-alone valuations of the individual firms. 
C) gains arising if the combined companies can save on the costs of production, marketing, distribution, and R&D. 
D) both b) and c) 
A) gains from hedging. 
B) gains obtained when the value of the acquiring and target firms, combined together, is greater than the stand-alone valuations of the individual firms. 
C) gains arising if the combined companies can save on the costs of production, marketing, distribution, and R&D. 
D) both b) and c)

Question 11

Governments regulate international trade

Accepted Answer

A) to raise revenue (e.g.through tariffs). 
B) to protect domestic industries. 
C) to pursue other economic policy objectives (e.g.North Korea forgoing trade). 
D) all of the above 
A) to raise revenue (e.g.through tariffs). 
B) to protect domestic industries. 
C) to pursue other economic policy objectives (e.g.North Korea forgoing trade). 
D) all of the above

Question 12

FDI can take the form of

Accepted Answer

A) Greenfield investment. 
B) cross-border M&A. 
C) establishing new production facilities in a foreign country. 
D) all of the above 
A) Greenfield investment. 
B) cross-border M&A. 
C) establishing new production facilities in a foreign country. 
D) all of the above

Question 13

U.S.car makers were forced to build their own network of dealerships to enter the Japanese market.

Accepted Answer

A) This is an example of backward vertical integration. 
B) This is an example of forward vertical integration. 
C) This is an example of sideways vertical integration. 
D) None of the above 
A) This is an example of backward vertical integration. 
B) This is an example of forward vertical integration. 
C) This is an example of sideways vertical integration. 
D) None of the above

Question 14

Severe imperfections in the labor market lead to persistent wage differentials among countries.Some explanations include

Accepted Answer

A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
C) but these differences are offset by low productivity in low labor cost countries. 
D) both a) and b) 
A) because workers are not allowed to freely move across national boundaries to seek higher wages. 
B) because workers may choose to not move across national boundaries to seek higher wages due to the cultural differences. 
C) but these differences are offset by low productivity in low labor cost countries. 
D) both a) and b)

Question 15

Why do governments regulate international trade?

Accepted Answer

A) To raise revenue 
B) Protect domestic industries 
C) Pursue other economic objectives 
D) All of the above 
A) To raise revenue 
B) Protect domestic industries 
C) Pursue other economic objectives 
D) All of the above

Question 16

Severe imperfections in the labor market arise from immobility of workers due to immigration barriers.As a response,firms should consider

Accepted Answer

A) moving to the workers. 
B) moving to countries where labor services are the lowest in absolute terms. 
C) moving to countries where labor services are underpriced relative to productivity. 
D) hiring illegal immigrants. 
A) moving to the workers. 
B) moving to countries where labor services are the lowest in absolute terms. 
C) moving to countries where labor services are underpriced relative to productivity. 
D) hiring illegal immigrants.

Question 17

Severe imperfections in the labor market lead to

Accepted Answer

A) persistent wage differentials among countries. 
B) persistent exchange rate volatility among countries. 
C) persistent interest rate differentials among countries. 
D) none of the above 
A) persistent wage differentials among countries. 
B) persistent exchange rate volatility among countries. 
C) persistent interest rate differentials among countries. 
D) none of the above

Question 18

Examples of operational risk include

Accepted Answer

A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above 
A) the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments. 
B) unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local credit facilities. 
C) restrictions imposed on the maximum ownership share by foreigners, mandatory transfer of ownership to local firms over a certain period of time (fade-out requirements), and the nationalization of local operations of MNCs. 
D) none of the above

Question 19

Trade barriers can arise naturally.Which of the following are natural barriers to trade?

Accepted Answer

A) Transportation costs 
B) Quotas 
C) Tariffs 
D) Transactions costs 
A) Transportation costs 
B) Quotas 
C) Tariffs 
D) Transactions costs

Question 20

According to Raymond Vernon (1966),

Accepted Answer

A) U.S.firms undertake FDI at a particular stage in the life cycle of the products that they initially introduced. 
B) the majority of new products, such as computers, televisions, and mass-produced cars, were developed by U.S.firms and first marketed in the United States. 
C) in the early stage of the product life cycle, the demand for the new product is relatively insensitive to the price and thus the pioneering firm can charge a relatively high price. 
D) all of the above 
A) U.S.firms undertake FDI at a particular stage in the life cycle of the products that they initially introduced. 
B) the majority of new products, such as computers, televisions, and mass-produced cars, were developed by U.S.firms and first marketed in the United States. 
C) in the early stage of the product life cycle, the demand for the new product is relatively insensitive to the price and thus the pioneering firm can charge a relatively high price. 
D) all of the above

Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

The product life-cycle theory predicts that

Once a MNC decides to undertake a foreign project,it can take various measures to minimize its exposure to political risk.These include

A classic example for trade barrier-motivated FDI is

Examples of transfer risk include

The dominant source of FDI outflows

Considering the fact that many barriers to international portfolio investments have been dismantled in recent years,

FDI stocks

The boomerang effect

In evaluating political risk,experts focus their attention on a set of key factors such as

Synergistic gains refers to:

Governments regulate international trade

FDI can take the form of

U.S.car makers were forced to build their own network of dealerships to enter the Japanese market.

Severe imperfections in the labor market lead to persistent wage differentials among countries.Some explanations include

Why do governments regulate international trade?

Severe imperfections in the labor market arise from immobility of workers due to immigration barriers.As a response,firms should consider

Severe imperfections in the labor market lead to

Examples of operational risk include

Trade barriers can arise naturally.Which of the following are natural barriers to trade?

According to Raymond Vernon (1966),

Globalization and the Multinational Firm

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

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

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