Question 1

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 monopolist are able to charge higher prices after eliminating their competitors.
D)  all of the aboveE) C) and D)
F) A) and C)

Question 2

A country like North Korea

Accepted Answer

A)  probably rejects the notion of increased opportunity presented by free trade.
B)  engages in free trade.
C)  lies on a production possibilities curve superior to South Korea, since North Korea protects its domestic producers.
D)  none of the aboveE) B) and D)
F) A) and B)

Question 3

Which state is better at making guns?

Accepted Answer

A)  South Carolina
B)  North Carolina
C)  neitherD) None of the above
E) All of the above

Question 4

The Nestlé Corporation, a well-known Swiss MNC, used to issue two different classes of common stock, bearer shares and registered shares, and foreigners were allowed to hold only

Accepted Answer

A)  registered shares.
B)  bearer shares.
C)  voting shares.
D)  convertible shares.E) All of the above
F) C) and D)

Question 5

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

Question 6

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) A) and D)
F) A) and C)

Question 7

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

Question 8

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

Question 9

Privatization refers to process of

Accepted Answer

A)  having government operate businesses for the betterment of the public sector.
B)  government allowing the operation of privately owned business.
C)  prohibiting government operated enterprises.
D)  a country divesting itself of the ownership and operation of a business venture by turning it over to the free market system.E) B) and C)
F) A) and C)

Question 10

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.E) A) and D)
F) None of the above

Question 11

What is the increased amount of goods available in Northern Ireland after trade?

Accepted Answer

A)  400 more bottles of whiskey and 200 more kegs of beer
B)  1,000 more bottles of whiskey and 500 more kegs of beer
C)  200 more bottles of whiskey and 400 more kegs of beerD) A) and B)
E) None of the above

Question 12

Which state has a comparative advantage in wheat production in Case I?

Accepted Answer

A)  South Dakota
B)  North Dakota
C)  Neither stateD) B) and C)
E) A) and C)

Question 13

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) B) and C)
F) C) and D)

Question 14

In countries like France and Germany,

Accepted Answer

A)  managers have often made business decisions with regard 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.E) A) and C)
F) A) and B)

Question 15

Now suppose that Southern workers receive a raise to €2 per day. Will trade be possible at the exchange rate you found in the last question?

Accepted Answer

A)  Yes
B)  NoC) A) and B)
D) undefined

Question 16

While the corporate governance problem is not confined to the United States,

Accepted Answer

A)  it can be a much more serious problem in many other parts of the world, where legal protection of shareholders is weak or nonexistent.
B)  it has reached its high point in the United States.
C)  the U.S. legal system, with lawsuits used only as a last resort, ensured that any conflicts of interest will soon be a thing of the past.
D)  none of the aboveE) A) and B)
F) None of the above

Question 17

Which state has an absolute advantage in producing wheat in Case I?

Accepted Answer

A)  South Dakota
B)  North Dakota
C)  Neither stateD) A) and B)
E) A) and C)

Question 18

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

Question 19

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) A) and C)
F) A) and D)

Question 20

Counties 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, if free trade is allowed, the market clearing price (or exchange rate if you will)  between food and textiles will be

Accepted Answer

A)  one unit of food for one unit of textiles.
B)  somewhere between One unit of food for two units of textiles and two units of food for one unit of textiles.
C)  one unit of food for two units of textiles.
D)  two units of food for one unit of textiles.E) B) and C)
F) A) and D)

Exam 1: Globalization and the Multinational Firm

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

Correct Answer
verified

The goal of shareholder wealth maximization

Correct Answer
verified

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

Correct Answer
verified

While the corporate governance problem is not confined to the United States,

Correct Answer
verified

The Nestlé Corporation, a well-known Swiss MNC, used to issue two different classes of common stock, bearer shares and registered shares, and foreigners were allowed to hold only

Correct Answer
verified

Which state is better at making guns?

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

Which state has an absolute advantage in producing wheat in Case I?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Privatization refers to process of

Correct Answer
verified

In countries like France and Germany,

Correct Answer
verified

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

Correct Answer
verified

A country like North Korea

Correct Answer
verified

Correct Answer
verified

What is the increased amount of goods available in Northern Ireland after trade?

Correct Answer
verified

Which state has a comparative advantage in wheat production in Case I?

Correct Answer
verified

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

Now suppose that Southern workers receive a raise to €2 per day. Will trade be possible at the exchange rate you found in the last question?

Correct Answer
verified

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

Correct Answer
verified

Exam 1: Globalization and the Multinational Firm

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

Correct AnswerverifiedShow Answer

The goal of shareholder wealth maximization

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

While the corporate governance problem is not confined to the United States,

Correct AnswerverifiedShow Answer

The Nestlé Corporation, a well-known Swiss MNC, used to issue two different classes of common stock, bearer shares and registered shares, and foreigners were allowed to hold only

Correct AnswerverifiedShow Answer

Which state is better at making guns?

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 AnswerverifiedShow Answer

Which state has an absolute advantage in producing wheat in Case I?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Privatization refers to process of

Correct AnswerverifiedShow Answer

In countries like France and Germany,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country like North Korea

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the increased amount of goods available in Northern Ireland after trade?

Correct AnswerverifiedShow Answer

Which state has a comparative advantage in wheat production in Case I?

Correct AnswerverifiedShow Answer

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

Now suppose that Southern workers receive a raise to €2 per day. Will trade be possible at the exchange rate you found in the last question?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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