Question 1

Comparative advantage

Accepted Answer

A) is also known as relative efficiency. 
B) can lead to trade even in the face of absolute efficiency. 
C) exists when one party can produce a good or service at a lower opportunity cost than another party. 
D) all of the above 
A) is also known as relative efficiency. 
B) can lead to trade even in the face of absolute efficiency. 
C) exists when one party can produce a good or service at a lower opportunity cost than another party. 
D) all of the above

Question 2

When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally,

Accepted Answer

A) they trade one market imperfection, information asymmetry, for another, exchange rate risk. 
B) they benefit from an expanded opportunity set. 
C) they should not bother to read or to understand the prospectus, since it's probably written in a foreign language. 
D) they should invest only in dollars or euros. 
A) they trade one market imperfection, information asymmetry, for another, exchange rate risk. 
B) they benefit from an expanded opportunity set. 
C) they should not bother to read or to understand the prospectus, since it's probably written in a foreign language. 
D) they should invest only in dollars or euros.

Question 3

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 4

Japan has experienced large trade surpluses.Japanese investors have responded to this by

Accepted Answer

A) liquidating their positions in stocks to buy dollar denominated bonds. 
B) investing heavily in U.S.and other foreign financial markets. 
C) lobbying the U.S.government to depreciate its currency. 
D) lobbying the Japanese government to allow the yen to appreciate. 
A) liquidating their positions in stocks to buy dollar denominated bonds. 
B) investing heavily in U.S.and other foreign financial markets. 
C) lobbying the U.S.government to depreciate its currency. 
D) lobbying the Japanese government to allow the yen to appreciate.

Question 5

The goal of shareholder wealth maximization

Accepted Answer

A) is not appropriate for non-U.S.business firms. 
B) means that all business decisions and investments that a firm makes are done for the purpose of making the owners of the firm better off financially. 
C) is a sub-objective the firm should attempt to achieve after the objective of customer satisfaction is met. 
D) is in conflict with the privatization process taking place in third-world countries. 
A) is not appropriate for non-U.S.business firms. 
B) means that all business decisions and investments that a firm makes are done for the purpose of making the owners of the firm better off financially. 
C) is a sub-objective the firm should attempt to achieve after the objective of customer satisfaction is met. 
D) is in conflict with the privatization process taking place in third-world countries.

Question 6

Today for an MNC to produce merchandise in one country on capital equipment financed by funds raised in a number of different currencies through issuing securities to investors in many countries and then selling the finished product to customers in yet other countries is

Accepted Answer

A) not uncommon. 
B) extremely common. 
C) uncommon. 
D) the norm. 
A) not uncommon. 
B) extremely common. 
C) uncommon. 
D) the norm.

Question 7

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 8

An 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 9

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 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 critical goal. 
D) managers have traditionally embraced the maximization of shareholder wealth as the only worthy goal.

Question 10

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 11

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 12

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 13

Underlying the theory of comparative advantage are assumptions regarding

Accepted Answer

A) free trade between nations. 
B) that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively immobile. 
C) that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively mobile. 
D) a and b 
A) free trade between nations. 
B) that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively immobile. 
C) that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively mobile. 
D) a and b

Question 14

For case II,in what range must the "international" price of wheat fall? i.e.if North and South Dakota trade only with each other,what is the range of prices possible?

Accepted Answer

A) Between 1 bushel of wheat = 4/3 bottles of beer and 1 bushel of wheat = 2 bottles of beer 
B) Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = 2 bottles of beer 
C) Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = ½ bottles of beer 
D) None of the above 
A) Between 1 bushel of wheat = 4/3 bottles of beer and 1 bushel of wheat = 2 bottles of beer 
B) Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = 2 bottles of beer 
C) Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = ½ bottles of beer 
D) None of the above

Question 15

Since the end of World War I,the U.S.dollar has played the role of the dominant global currency,displacing the

Accepted Answer

A) German mark. 
B) French Franc. 
C) Japanese Yen. 
D) British pound. 
A) German mark. 
B) French Franc. 
C) Japanese Yen. 
D) British pound.

Question 16

Which state has a comparative advantage in producing wine in Case II?

Accepted Answer

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

Question 17

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 textiles. 
B) Country B is relatively more efficient than Country A in the production of food. 
C) Country A has an absolute advantage over Country B in the production of food and textiles. 
D) all of the above 
A) Country A is relatively more efficient than Country B in the production of textiles. 
B) Country B is relatively more efficient than Country A in the production of food. 
C) Country A has an absolute advantage over Country B in the production of food and textiles. 
D) all of the above

Question 18

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 19

For case II,let the international price be 1 bottle = 1 bushel.Derive South Dakota's "trading possibilities curve."

Accepted Answer

A) Option a 
B) Option b 
C) Option c 
D) Option d 
A) Option a 
B) Option b 
C) Option c 
D) Option d

Question 20

MNC stands for

Accepted Answer

A) Multinational Corporation. 
B) Multi Nationalized Corporation. 
C) Military National Cooperation. 
A) Multinational Corporation. 
B) Multi Nationalized Corporation. 
C) Military National Cooperation.

Comparative advantage

When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally,

The gains from trade

Japan has experienced large trade surpluses.Japanese investors have responded to this by

The goal of shareholder wealth maximization

Today for an MNC to produce merchandise in one country on capital equipment financed by funds raised in a number of different currencies through issuing securities to investors in many countries and then selling the finished product to customers in yet other countries is

An example of a political risk is

An MNC can

In countries like France and Germany,

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

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

Underlying the theory of comparative advantage are assumptions regarding

For case II,in what range must the "international" price of wheat fall? i.e.if North and South Dakota trade only with each other,what is the range of prices possible?

Since the end of World War I,the U.S.dollar has played the role of the dominant global currency,displacing the

Which state has a comparative advantage in producing wine in Case II?

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?

For case II,let the international price be 1 bottle = 1 bushel.Derive South Dakota's "trading possibilities curve."

MNC stands for

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

Comparative advantage

When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally,

The gains from trade

Japan has experienced large trade surpluses.Japanese investors have responded to this by

The goal of shareholder wealth maximization

Today for an MNC to produce merchandise in one country on capital equipment financed by funds raised in a number of different currencies through issuing securities to investors in many countries and then selling the finished product to customers in yet other countries is

An example of a political risk is

An MNC can

In countries like France and Germany,

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

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

Underlying the theory of comparative advantage are assumptions regarding

For case II,in what range must the "international" price of wheat fall? i.e.if North and South Dakota trade only with each other,what is the range of prices possible?

Since the end of World War I,the U.S.dollar has played the role of the dominant global currency,displacing the

Which state has a comparative advantage in producing wine in Case II?

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?

For case II,let the international price be 1 bottle = 1 bushel.Derive South Dakota's "trading possibilities curve."

MNC stands for

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