Question 1

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 aboveE) None of the above
F) A) and B)

Question 2

MNCs can use their global presence to

Accepted Answer

A)  take advantage of underpriced labor services available in certain developing countries.
B)  gain access to special R&D capabilities residing in advanced foreign counties.
C)  boost profit margins and create shareholder value.
D)  all of the aboveE) All of the above
F) A) and C)

Question 3

Under the theory of comparative advantage,liberalization of international trade will

Accepted Answer

A)  enhance the welfare of the world's citizens.
B)  create unemployment and displacement of workers permanently.
C)  result in higher prices in the long run as monopolists are able to charge higher prices after eliminating their competitors.
D)  all of the aboveE) A) and D)
F) None of the above

Question 4

An MNC may gain from its global presence by

Accepted Answer

A)  spreading R&D expenditures and advertising costs over their global sales.
B)  pooling global purchasing power over suppliers.
C)  utilizing their technological and managerial know-how globally with minimum additional costs.
D)  all of the above are potential gainsE) All of the above
F) B) and D)

Question 5

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.E) All of the above
F) A) and C)

Question 6

The ascendance of the dollar the dominant global currency reflects several key factors such as

Accepted Answer

A)  the size of the U.S.population.
B)  the mature and open capital markets of the U.S.economy.
C)  exchange rate stability.
D)  all of the above.E) B) and D)
F) C) and D) B

Question 7

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.E) A) and B)
F) B) and C)

Question 8

The ultimate guardians of shareholder interest in a corporation,are the

Accepted Answer

A)  rank and file workers.
B)  senior management.
C)  boards of directors.
D)  all of the above.E) B) and D)
F) None of the above

Question 9

The massive privatization that is currently taking place in formerly socialist countries,will likely

Accepted Answer

A)  eventually enhance the standard of living to these countries' citizens.
B)  depend on private investment.
C)  increase the opportunity set facing these countries' citizens.
D)  all of the aboveE) A) and B)
F) A) and C)

Question 10

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S.dollar.This means

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 lessened price competition from Mexican imports.
D)  both b)  and c)  are correctE) B) and D)
F) C) and D) D

Question 11

Restrictions or impediments to free trade include such things as

Accepted Answer

A)  import quotas.
B)  import tariffs.
C)  costly transportation.
D)  all of the aboveE) A) and B)
F) B) and D)

Question 12

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment

Accepted Answer

A)  are still inherently local.
B)  are still regional in nature.
C)  are slowly becoming globalized.
D)  are highly globalized.E) All of the above
F) None of the above

Question 13

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 aboveE) B) and C)
F) A) and D)

Question 14

The emergence of global financial markets is due in no small part to

Accepted Answer

A)  advances in computer and telecommunications technology.
B)  enforcement of the Soviet system of state ownership of resources of production.
C)  government regulation and protection of infant industries.
D)  none of the aboveE) A) and D)
F) None of the above A

Question 15

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/€1.00E) A) and B)
F) A) and C)

Question 16

Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2.One year later,the stock rises to £60.You are happy with your 20 percent return on the stock,but when you sell the stock and exchange your £60 for dollars,you only get $45 since the pound has fallen to £1 = $0.75.This loss of value is an example of

Accepted Answer

A)  exchange rate risk.
B)  political risk.
C)  market imperfections.
D)  weakness in the dollar.E) All of the above
F) C) and D)

Question 17

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 aboveD) A) and B)
E) None of the above

Question 18

If you can make a good at a low opportunity cost,

Accepted Answer

A)  you would be well served to produce that good and trade for other goods.
B)  you should make something else that has a higher value.
C)  you should make something else that has a higher opportunity cost.
D)  none of the aboveE) A) and B)
F) All of the above

Question 19

The owners of a business are the

Accepted Answer

A)  taxpayers.
B)  workers.
C)  suppliers.
D)  shareholders.E) A) and D)
F) B) and C)

Question 20

A purely domestic firm sources its products,sells its products,and raises its funds domestically

Accepted Answer

A)  can face stiff competition from a multinational corporation that can source its products in one country, sell them in several countries, and raise its funds in a third country.
B)  can be more competitive than an MNC on its home turf due to superior knowledge of the local market.
C)  can still face exchange rate risk, just like an MNC.
D)  all of the above are trueE) C) and D)
F) A) and B)

Exam 1: Globalization and the Multinational Firm

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?

Correct Answer
verified

MNCs can use their global presence to

Correct Answer
verified

Under the theory of comparative advantage,liberalization of international trade will

Correct Answer
verified

An MNC may gain from its global presence by

Correct Answer
verified

A multinational firm can be defined as a firm that

Correct Answer
verified

The ascendance of the dollar the dominant global currency reflects several key factors such as

Correct Answer
verified
B

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

Correct Answer
verified

The ultimate guardians of shareholder interest in a corporation,are the

Correct Answer
verified

The massive privatization that is currently taking place in formerly socialist countries,will likely

Correct Answer
verified

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S.dollar.This means

Correct Answer
verified
D

Restrictions or impediments to free trade include such things as

Correct Answer
verified

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment

Correct Answer
verified

The gains from trade

Correct Answer
verified

The emergence of global financial markets is due in no small part to

Correct Answer
verified
A

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

Correct Answer
verified

Correct Answer
verified

International trade is

Correct Answer
verified

If you can make a good at a low opportunity cost,

Correct Answer
verified

The owners of a business are the

Correct Answer
verified

A purely domestic firm sources its products,sells its products,and raises its funds domestically

Correct Answer
verified

Exam 1: Globalization and the Multinational Firm

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?

Correct AnswerverifiedShow Answer

MNCs can use their global presence to

Correct AnswerverifiedShow Answer

Under the theory of comparative advantage,liberalization of international trade will

Correct AnswerverifiedShow Answer

An MNC may gain from its global presence by

Correct AnswerverifiedShow Answer

A multinational firm can be defined as a firm that

Correct AnswerverifiedShow Answer

The ascendance of the dollar the dominant global currency reflects several key factors such as

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

The ultimate guardians of shareholder interest in a corporation,are the

Correct AnswerverifiedShow Answer

The massive privatization that is currently taking place in formerly socialist countries,will likely

Correct AnswerverifiedShow Answer

Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S.dollar.This means

Correct AnswerverifiedD

Restrictions or impediments to free trade include such things as

Correct AnswerverifiedShow Answer

Undoubtedly,we are now living in a world where all the major economic functions-consumption,production,and investment

Correct AnswerverifiedShow Answer

The gains from trade

Correct AnswerverifiedShow Answer

The emergence of global financial markets is due in no small part to

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

International trade is

Correct AnswerverifiedShow Answer

If you can make a good at a low opportunity cost,

Correct AnswerverifiedShow Answer

The owners of a business are the

Correct AnswerverifiedShow Answer

A purely domestic firm sources its products,sells its products,and raises its funds domestically

Correct AnswerverifiedShow Answer

Correct Answer
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B

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D

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A

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