Chapter 1

1
Service workers, who once thought globalization would not affect their jobs,
are discovering that more and more service jobs are being outsourced to foreign
countries
A)
True
B)
False
2
Most global markets are for consumer goods despite the national differences
in tastes and preferences.
A)
True
B)
False
3
Foreign direct investment occurs when a firm invests resources in business
activities outside its home country.
A)
True
B)
False
4

The two main components of globalization are:

A)
the globalization of markets and the globalization
production.
B)
the globalization of production and the globalization of finance.
C)
the standardization of technology and the globalization of markets.
D)
the globalization of finance and the globalization of accounting.

of

5______________________ is primarily responsible for policing the world trading system

and making sure nation states adhere to the rules laid down in treaties the nation
states have signed.
A)
Interpol
B)
The United Nations (UN)
C)
The World Trade Organization (WTO)
D)
The International Monetary Fund (IMF)
6
Data about the volume of exports and world GDP suggest among other things
that the economies of the world's nation-states _________________________________.
A)
are becoming more intertwined and dependent on each other
for goods and services
B)
are becoming no wealthier as a whole, implying that the wealth is only
shifting from country to country
C)
firms are focusing on developing competencies at home and exporting
goods and services from excess capacity
D)
markets have become globalized, but globalization of production has
lagged

7
Which of the following best describes the technological change that has been
a driver of globalization?
A)
Communications has not kept pace with other areas.
B)
The microprocessor may be the single most important
innovation.
C)
The Internet is important for gaming and social media within the
domestic economy, but has yet to realize promise in globalization.
D)
Despite the widespread use of containerization, transportation costs
continue to rise.
8
Which of the following is NOT one of drivers that has made the globalization
of production feasible?
A)
Decline of transportation costs
B)
Falling costs of information processing
C)
World-wide communications networks
D)
New applications for social media
9
In the early 1960s, the United States was by far the world's dominant
industrial power, and:
A)
even with the relative decline, it is still the largest industrial
power.
B)
Germany, France and Italy have growth rates that suggest they may
soon overtake the US.
C)
China's share of world GDP is still small given its large population.
D)
though some Asian countries have increased their share of world
exports, the US will remain the world's leading exporter for some time to come.
10

Medium-size and small multinationals (mini-multinationals):

A)
are not significant players in international business.
B)
have not grown significantly.
C)
have few of the same issues of complexity that large multinationals do.
D)
are becoming increasingly involved in international business.

11
Latin America has become a more attractive market for exports and a site for
foreign direct investment for all the following reasons EXCEPT:
A)
both democracy and free market reforms have taken place in much of
Latin America.
B)
debt and inflation are down across most of Latin America.
C)
state involvement in the economies has almost completely
disappeared throughout Latin America.
D)
foreign investment is now welcomed in much of Latin America.

12
In Seattle, during December 1999, massive protests against globalization
captured the attention of the world. Which of the following was not an issue the
protesters raised?
A)
Domestic job losses
B)
Downward pressure on wage rates of unskilled workers
C)
Environmental standards that were too strict
D)
Cultural imperialism of global media and multinational enterprises
13
One of the most frequently voiced concerns raised by opponents of
globalization is that ___________________________.
A)
globalization has led to increased global warming
B)
falling barriers to international trade have destroyed
manufacturing jobs in the wealthy advanced countries such as the United
States and Western Europe
C)
all ships rise with the tide
D)
prices for basic necessities of life have increased around the world
14
One of the criticisms of the WTO is the concern that the organization will
undermine the sovereignty of member nations. Which of the following is not a
criticism in this area?
A)
Democratically elected governments must submit to unelected
bureaucrats from other countries.
B)
Nations can no longer control their own destiny.
C)
There is a lack of transparency and accountability.
D)
The power of the organization rests largely on the ability to
persuade member states to follow a certain action.
15

Successful managers in international business:

A)
should pay little attention to governments and focus on the needs of
the business.
B)
should focus on the values and systems of the home country instead of
trying to figure out the nuances in other countries.
C)
insist that payments be made in U.S. dollars to avoid losses in currency
transactions.
D)
face issues more complex than the issues managers face in
strictly domestic business.
Chapter 2
1
In the purest market economy, all productive activities are privately owned.
A)
True
B)
False
2

Both U.S. law and OECD conventions condemn all forms of bribery with the
exception of grease payments, which expedite the performance of routine
government action.
A)
True
B)
False
3
In the high-technology "knowledge" economy of the twenty-first century, intellectual
property is becoming less important than creating open access to information.
A)
True
B)
False
4
A country's
A)
B)
C)
D)

political, economic, and legal system constitutes its:

legal economy.
political economy.
economic economy.
FDI economy.

5
___________ refers to a political system where the needs of society as a whole are
seen as more important than individual freedoms.
A)
Totalitarianism
B)
Representative democracy
C)
Collectivism
D)
Individualism
6
In the early 20th century, the socialist ideology split into two broad camps,
communists and _________________.
A)
Maoists
B)
Sandinistas
C)
social democrats
D)
liberals
7
The process by which state-owned enterprises are sold to private investors is known
as ________________________.
A)
privatization
B)
building a ex-command economy
C)
expropriation
D)
creating intellectual and economic property
8

Which of the following is not one of the major forms of totalitarianism?

A)
Communist totalitarianism
B)
Theocratic totalitarianism
C)
Tribal totalitarianism
D)
Plutocratic totalitarianism
9
The three general types of economic systems are:
A)
free, limited and fixed.
B)
industrial, service and social.
C)
international, domestic and multi-domestic.
D)
market, command and mixed.
10
Consistent
economy is
A)
B)
C)
D)

with the collectivist ideology, the objective of a __________________

for the government to allocate resources for the good of society.
market
command
mixed
benevolent-dictator

11
In mixed economies:
A)
the state operates transportation systems and utilities, but no other
industries.
B)
the state may take over companies in danger of collapsing.
C)
the state takes an important advisory role in industries of national
importance.
D)
the state owns companies, but private individuals take on advisory
roles in companies focusing on consumer-oriented goods.
12
Contracts drafted under a common law framework tend to be ______________.
A)
shorter and less specific because many of the issues are already in the
code
B)
very detailed with all contingencies spelled out
C)
less flexible than one drawn up in a civil law system
D)
less expensive than one drawn up in a civil law system
13
Property rights refer to the legal rights over the use to which a resource is put and
over the use made of any income that may be derived from that resource. Property
rights can be violated in two ways through private action and through ____________.
A)
unrestricted internet access

B)
C)
D)

public action
international treaty
black markets and counterfeits

14
In addition to competitiveness, country differences in product safety and liability
laws raise an important ____________ issue for firms doing business abroad if there
significant differences in the toughness of product safety laws in the home country
and the foreign company in which the firm is doing business.
A)
logistics
B)
operational
C)
legal
D)
ethical
15
Other things being equal, a nation with ___________________________, democratic
political institutions, and a strong legal system that protects property rights and
limits corruption is a more attractive as a place in which to business than countries
without these factors.
A)
strong political parties
B)
a market-based economic system
C)
a well-established stock market
D)
membership in international organizations
Chapter 3
1
Although democracy may not always be the cause of initial economic progress, it
seems to be one consequence of that process.
A)
True
B)
False
2
In the 1980s and 90s two trends characterized the world's nation-states a wave of
democratic revolutions and a strong move away from planned economies.
A)
True
B)
False
3
By identifying and investing early in country that will become an economic star in
the future, an international firm may build brand loyalty and gain experience in that
country's business practices. This is known as the pioneer advantages.
A)
True
B)
False

4
The purchasing power parity adjustment (PPP):
A)
measures the difference between the value of the US dollar and the
Euro.
B)
distorts historical economic data.
C)
makes it difficult to compare spending patterns between countries.
D)
is based on the cost of living in the United States.
5
Official measurements of a country's economic development are essential elements
international businesses need for assessment but these official figures:
A)
are often deliberately skewed by governments to present a more
desirable investment picture.
B)
are so dynamic that is difficult to use them.
C)
do not include unrecorded cash transactions or barter, which
could be substantial.
D)
are far less accurate and reliable than information available from
private sources.
6
Which of the following is not one of the three measures used to calculate the
Human Development Index developed by the UN based on work of Amartya Sen?
A)
Life expectancy at birth
B)
Quality of air and water
C)
Educational attainment
D)
Whether average incomes are sufficient to meet the basic needs of life
7
Without __________________________, businesses and individuals run the risk that
profits they might earn from their innovative ideas might be appropriated by the
state, other companies, or criminal elements.
A)
strong property rights protections
B)
relief from taxation
C)
access to low-cost capital
D)
secure access to the Internet
8
The collapse of totalitarian and communist states, new information and
communications technologies, and economic advances in many countries have led
to:
A)
the spread of democracy.
B)
the growing importance of the United Nations in world affairs.
C)
the domination of world trade by the United States and its Western
Europe allies.

D)

the rise of economic terrorism.

9
The economic transformation that has been spreading since the 1980s was, in
general, a result of the fact that _______________________________ failed to deliver the
sustained economic performance that was achieved by countries adopting
____________________.
A)
market-based economies; mixed economies
B)
mixed and command economies; market-based economies
C)
command economies; mixed economies
D)
market-based and mixed economies; command economies
10
____________ involves removing legal restrictions to the free play of markets, the
establishment of private enterprises, and the manner in which private enterprises
operate.
A)
Deregulation
B)
A market-based economy
C)
A command economy
D)
The interplay of supply and demand
11
A nation may _______ as a means of encouraging business owners to seek gains in
economic efficiency.
A)
privatize
B)
downsize
C)
regulate
D)
divest
12
After the collapse of Communism, many former Communist countries lacked the
legal structure required to ___________________________.
A)
apply for membership in the World Trade Organization
B)
enter into treaties, especially those that dealt with commercial matters
C)
open markets to laws of supply and demand
D)
protect property rights as all property had been held by the
state
13
Generally, the long-term monetary benefits of doing business in a country are a
function of the size of the market, the present purchasing power of consumers in
that market, and __________________.
A)
the likely future wealth of consumers
B)
the average age and demographic profile of its citizens

C)
D)

the state of existing international competition

the availability of natural resources

14
Political risk
A)
is the likelihood that economic mismanagement will cause drastic
changes in a country's business environment that hurt the profit and goals of a
particular business enterprise.
B)
is the likelihood that political forces will cause drastic changes
in country's business environment that adversely affect the profit and
goals of a business enterprise.
C)
is the likelihood that a trading partner will opportunistically break a
contract or expropriate property rights.
D)
is the likelihood that commercial mismanagement will cause drastic
changes in a country's business environment that will negatively affect the profit
and goals of a particular business enterprise.
15
The likelihood that economic mismanagement will cause drastic changes in a
country's business environment that hurt the profit and other goals of a particular
business enterprise is an example of:
A)
legal risk.
B)
political risk.
C)
economic risk.
D)
fiscal risk.
Chapter 4
1
Folkways are norms that are seen as central to the functioning of a society and to
its social life.
A)
True
B)
False
2
Critics of the work of Geert Hofstede and his work on culture in the workplace have
been proven correct, and the work is becoming irrelevant in the 21st century.
A)
True
B)
False
3
Fundamentalist movements, separatist movements, and continuing ethnic strains
are reactions against cultural convergence that affect international business.
A)
True
B)
False

4
______________________ is an understanding of how cultural differences across and
within nations can affect the way business is practiced.
A)
Cross-cultural literacy
B)
A code of ethics
C)
Secular religion
D)
Social culture
5
_____ can be defined as a system of values and norms that are shared among a
group of people and that when taken together constitute a design for living.
A)
Mores
B)
Society
C)
Culture
D)
Folkways
6
All of the following are determinants of culture except:
A)
geography.
B)
religion.
C)
language.
D)
education.
7
One of the harmful effects of the emphasis on individual performance in many
Western societies and the United States is:
A)
the expression of rugged individualism.
B)
the emphasis on entrepreneurship.
C)
the high degree of managerial mobility.
D)
the emphasis on effective teams and team building.
8
All societies are stratified on a hierarchical basis into _________________, which are
typically defined by characteristics such as family background, occupation, and
income.
A)
cultures
B)
tribes
C)
hierarchies of need
D)
social strata
9
Demonstrating the implications that religion can have on business, _____ made the
connection between Protestant ethics and the spirit of capitalism.

A)
B)
C)
D)

John Dunning
Adam Smith
Michael Porter
Max Weber

10
Which of the following is not a response to the Islam prohibition against the
payment or receipt of interest?
A)
U.S. banks are effectively closed out of Islamic markets.
B)
An alternative to charging interest is a kind of profit sharing scheme
called mudarabah.
C)
An alternative is the murabaha contract, where a markup on the
purchase price goes to the bank.
D)
Only a few nations actually enforce Islamic banking conventions.
11
Education can be a determinant of national competitive advantage because:
A)
it has been demonstrated that higher GPAs and GMAT scores are
related to a nation's competitiveness.
B)
a pool of skilled and educated workers often leads to economic
success.
C)
most firms prefer to place their highly educated managers in places
where their education will outperform those local employees with less education.
D)
higher levels of education mean that cultural differences are irrelevant.
12
In the workplace, culture:
A)
is the attempt by management to improve productivity by getting
workers to attend theater and opera.
B)
is a distraction since workers have little choice in the tasks they must
perform.
C)
helps explain differences in how work is organized and how
workers relate to management.
D)
is becoming increasingly irrelevant with the popularity of the Internet.
13
With regard to globalization, it has been argued that advances in transportation and
communication technologies, the dramatic increase in trade, and the rise of global
corporations have resulted in a slow but steady blending of different cultures into
some universally accepted values and norms. This is known as the
___________________.
A)
Internet effect
B)
homogenization of culture
C)
globalization effect on culture

D)

convergence hypothesis

14
When a manager believes that his own ethnic group or culture is superior to those
of others, the manager is demonstrating a(n) __________ attitude.
A)
polycentric
B)
ethnocentric
C)
geocentric
D)
transcentric
15
Culture and national competitive advantage are closely related. An important
implication for international business is that:
A)
value systems affect the costs of doing business.
B)
natural resources are generally more important for competitiveness
than culture.
C)
governments can have little impact on national competitive
advantages.
D)
American models of how business should be conducted are becoming
the only means for success in international business.

Chapter 5
1
What is considered normal practice in one nation is usually considered ethical in
another.
A)
True
B)
False
2
When the Foreign Corrupt Practices Act was first passed, some U.S. businesses
immediately objected that the Act would put them at a competitive disadvantage,
though that has not proved true.
A)
True
B)
False
3
The ethical obligations of a multinational corporation toward employment
conditions, human rights, corruption, environmental pollution, and the use of power
are not always clear-cut.
A)
True
B)
False

4
When a resource, held in common by all but owned by no one, is overused by
individuals, resulting in its degradation, it is a phenomenon known as:
A)
Hardin's obloquy.
B)
environmental tragedy.
C)
the tragedy of the commons.
D)
environmental degradation.
5
Paying bribes:
A)
is generally unsavory but is not a criminal offense in developed
countries.
B)
may actually stimulate the economy in some developing
countries according to some economists.
C)
cannot be distinguished from facilitating payments.
D)
is essential for most international businesses in developing countries.
6
When a firm faces a situation in which none of the available alternatives seems
ethically acceptable, the firm is facing:
A)
an ethical question.
B)
the Sullivan principle.
C)
an ethical dilemma.
D)
moral uncertainty.
7
Unethical behavior is determined by:
A)
personal ethics, organization culture, realistic performance goals,
leadership, and decision-making processes.
B)
unrealistic performance goals, personal ethics, organization
culture, leadership, and decision-making processes.
C)
decision-making processes, national culture, unrealistic performance
goals, personal ethics, and leadership.
D)
national culture, realistic performance goals, leadership, decisionmaking processes, and personal ethics.
8
Several studies of unethical behavior in business have concluded that
businesspeople do not realize they are acting unethically, primarily because
_________________________.
A)
their personal ethics are not as demanding as business ethics
B)
profit is a more important business goal than ethical behavior
C)
they learned their decision-making skills before it became a standard
practice to incorporate an ethical dimension

D)
they apply a business calculus to what they perceive to be a
business decision forgetting that the decision may also have an important
ethical dimension
9
Using Hostede's dimensions of social culture, a recent study found that cultures
where individualism and ________________________ were high were more likely to
emphasize the importance of behaving ethically than firms headquartered in
cultures that emphasized other attributes.
A)
uncertainty avoidance
B)
masculinity
C)
power distance
D)
Confucian dynamism
10
The Friedman doctrine, cultural relativism, the righteous moralist, and the nave
immoralist are approaches that have some value but are unsatisfactory in important
ways. Companies do adopt these approaches, but they are generally known as
__________________.
A)
philosophical exercises
B)
corporate practical necessities
C)
straw men
D)
neoclassical ethics
11
___________________ approaches to ethics hold that the moral worth of actions or
practices is determined by their consequences.
A)
Nave moralist
B)
Rights theories
C)
Kantian
D)
Utilitarian
12
According to _______, employing people in sweatshops, making them work long
hours for low pay in poor work conditions, is a violation of ethics.
A)
Kantian ethics
B)
utilitarianism
C)
the Friedman doctrine
D)
cultural relativism
13
Which of the following is NOT one of the five things international businesses and
managers can do to make sure ethical issues are considered in business decisions?

A)

Hiring and promoting people with a well-grounded sense of personal

ethics
B)
C)
behavior
D)
consider the

Ethical environmental scanning

Building an organizational culture that places a high value on ethical
Putting decision-making processes in place that require people to
ethical dimension of business decisions

14
One of the ways a business can build an organizational culture that values ethical
behavior is to articulate explicitly the values that emphasize ethical behavior. Many
companies do this by drafting _____________________.
A)
strong employment contracts in each of the languages in which it does
business
B)
a comprehensive mission statement
C)
detailed recruitment and employment policies
D)
a code of ethics
15
Which of the following is NOT true about moral courage?
A)
Moral courage enables managers to make a decision that may
unfavorable affect the profits of the firm if it is ethical.
B)
Moral courage may be required of employees to defy managers.
C)
Moral courage may be needed in delicate international business
decisions.
D)
Moral courage means having the strength to live with a
decision you may not like rather than discussing in the media or on the
internet.

Chapter 6
1
The Samuelson Critique suggests that when a rich country enters into a free trade
agreement with a poor country, the lower prices that the richer country's citizens
pay may not be enough to produce a net gain for that economy if the agreement
ends up lowering wages in the richer country.
A)
True
B)
False
2
Research has shown that countries that adopt an open economy and embrace free
trade will enjoy higher economic growth rates.
A)
True

B)

False

3
The most contentious implication of the new trade theory is that it shows that
government intervention and strategic trade policy work against economic growth
and the general well-being of the country.
A)
True
B)
False
4
When a government does not attempt to influence through trade barriers what its
citizens can buy from another country, or what they can sell to another country, the
government is promoting:
A)
free trade.
B)
capitalism.
C)
mercantilism.
D)
ethnocentrism.
5
Although import controls may benefit _____________, the theories of Smith, Ricardo
and Hecksher-Ohlin suggest that the economy as a whole is hurt by such actions.
A)
exporters
B)
importers
C)
producers or manufacturers
D)
consumers
6
The flaw with mercantilism is that it viewed trade as ____________________________.
A)
a zero-sum game
B)
an instrument of foreign policy
C)
incompatible with democratic governments
D)
more important than considerations of political sovereignty
7
In Adam Smith's theory of absolute advantage, he argues that __________________.
A)
a country should never produce goods at home that it can buy
at a lower cost from other countries
B)
import controls should be used to maintain an absolute advantage in
domestic production
C)
the first mover advantage is the most important and therefore
absolute
D)
a government should discourage imports and encourage exports
8

The theory of comparative advantage:

A)
holds that it may make sense to purchase goods from another
country even if your country can efficiently produce it.
B)
repudiated Adam Smith's theory of absolute advantage.
C)
holds that in some cases it is better to restrict trade to gain a
comparative advantage.
D)
is no longer relevant in today's world because of the impact of the
Internet.
9
Unlike Ricardo's theory, which argues that patterns in international trade are due to
differences in productivity, the Heckscher-Ohlin theory argues that the patterns are
due to differences in _____________________.
A)
protection of intellectual property rights
B)
attractive foreign exchange rates
C)
effectiveness of government intervention
D)
factor endowments
10
Economists
predictor of
regarded as
A)
B)
C)
D)
advantage

prefer the ___________ on theoretical grounds although it is a poor

real-world international trade patterns, and while the _______________ is
too limited, it predicts trade patterns with greater accuracy.
theory of absolute advantage; theory of comparative advantage
Smith's theory of absolute advantage; the Leontief Paradox
mercantilism; Hecksher-Ohlin theory
Hecksher-Ohlin theory; Ricardo's theory of competitive

11
The _________ suggests that trade is mutually beneficial because it allows for the
specialization of production, the realization of scale economies, the production of a
greater variety of products, and lower prices.
A)
product life cycle theory
B)
new trade theory
C)
theory of competitive advantage
D)
theory of comparative advantage
12
The new trade theory suggests that a country may have a dominant position in the
export of a good because ________________________________________.
A)
it was lucky enough to have one or more firms among the first
to produce that good
B)
the businesses in that country are more productive
C)
the country has more attractive factor endowments

D)
competition in that country has made the companies better global
competitors
13
Michael Porter argues that:
A)
the diamond is a mutually reinforcing system.
B)
government should not play a role in a nation's competitiveness.
C)
chance has little bearing on the success of a firm.
D)
factor endowments should be treated as a constant.
14
Which of the following is NOT an important implication for international business of
international trade theory?
A)
It makes sense for a firm to disperse its productive activities to
countries where they can be performed most efficiently.
B)
It makes sense for the individual firm to invest substantial resources to
build a first mover or early mover advantage.
C)
Businesses can exert a strong influence on government trade policy so
it is important to understand the theories of international trade.
D)
Because of the many debates on international trade theory, it
is generally wiser for a company to ignore international trade theory and
focus on its own strategies and tactics.
15
A firm can preempt available demand, gain cost advantages related to volume,
build an enduring brand ahead of competitors and establish a long-term,
sustainable competitive advantage by establishing a(n)_____________________.
A)
absolute advantage
B)
comparative advantage
C)
first mover advantage
D)
factor endowment advantage

Chapter 7
1
Both governments and consumers realize significant gains from tariffs, while
domestic producers typically see a negative effect.
A)
True
B)
False
2

Economists who have studied the issue have found little evidence that firm move
production in response to changes in pollution regulations.
A)
True
B)
False
3
A strategic trade policy that aims to establish domestic firms in a global industry
might attract retaliation and a trade war.
A)
True
B)
False
4
Which of the following is NOT one of the seven main instruments of trade policy?
A)
Subsidies
B)
Import quotas
C)
Local content requirements
D)
Quota rents
5
By lowering production costs, ________________ help domestic producers in two ways,
competing against foreign firms and gaining export markets.
A)
subsidies
B)
tariffs
C)
administrative policies
D)
boycotts
6
Preserving jobs, protecting industries important to national security, retaliating
against unfair foreign competition, and advancing human rights of individuals in
exporting countries are examples of __________________.
A)
political arguments for government intervention
B)
implementation of the new trade policy
C)
practical elements of absolute advantage
D)
political party platforms meant mainly to appeal to voters
7
Many economists criticize ______ for trade intervention arguing that it leads to
prolonged inefficiency.
A)
the retaliation policy
B)
strategic trade policy
C)
the infant industry argument
D)
human rights protection
8

The strategic trade policy argument has two main components. First, appropriate
government actions can help raise national incomes if the governments can ensure
domestic firms gain first mover advantages. Second, ______________________.
A)
it may help domestic firms overcome barriers to entry created
by foreign firms who had a first mover advantage
B)
it is necessary to help firms compete against other nations' stateowned companies
C)
it provides revenue for the government that helps keep other tax
revenues down
D)
proprietary knowledge is protected
9
Governments do not always act in the national interest as they intervene in the
economy, when, for example, ____________________.
A)
corruption is driven out of sight but still exists
B)
politically important interest groups influence them
C)
the political system favors business interests over those of consumers
D)
the country has few natural resources or other factor endowments
10
Protectionism:
A)
increased in the 1980s and 1990s after a period of relative
decline.
B)
was endorsed by the theories of both Adam Smith and David Ricardo.
C)
helps consumers by keeping prices low.
D)
preserves jobs in both the short-term and long-term.
11
The WTO's role as a global policeman for trade has so far been:
A)
successful.
B)
moderately unsuccessful.
C)
quite ineffective.
D)
completely disorganized.
12
Intellectual property rights have become thorny areas of international trade,
especially in relation to software, pharmaceuticals, music and entertainment, and:
A)
in response uniform patent and copyright laws have been adopted and
enforced by all WTO members.
B)
both the developed and developing world are standing together on
protect the rights of companies.
C)
innovation remains a principal driver for economic growth.
D)
this was one area of agreement in the Doha round and meetings
leading up to it.

13
All of the following were part of the agenda of the Doha round of talks except:
A)
cutting tariffs on industrial goods and services.
B)
phasing out subsidies to agricultural producers.
C)
increasing the use of antidumping laws to bring discipline to
the trading system.
D)
reducing barriers to cross-border investments.
14
A firm will need to consider ________________ as it develops and executes its
strategy, disperse activities around the globe and recognizes its cost structures.
A)
trade barriers
B)
the culture of its "C level" leadership
C)
language barriers
D)
theories of mercantilism
15
Business firms are major players on the international trade scene, and as such:
A)
they should ignore the minor complaints and extreme demands of
protestors.
B)
they should pay less attention to national laws and focus more on their
own strategies.
C)
they may ignore world events and international trade theory at the
operational level and let experts with specialized policy backgrounds make the
decisions to prevent costly errors.
D)
be aware of the problems both protectionism and free trade
can bring.

Chapter 8
1
Foreign direct investment has grown more rapidly than world trade and world
output for many reasons, including the fear of international businesses of
protectionist pressures.

A)
B)

True
False

2
Since 2002, the number of regulations that have been unfavorable to FDI have
increased, particularly in Latin America.
A)
True
B)
False
3
Only a few countries choose pragmatic nationalism preferring instead either the free
market or radical view.
A)
True
B)
False
4
If a company wants a quick entry into a foreign market, ______ are appropriate.
A)
mergers and acquisitions
B)
greenfield investments
C)
portfolio investments
D)
monopoly investments
5
FDI is more profitable than licensing when the firm has valuable know-how that
cannot be protected by a licensing contract and when ______________________.
A)
the firm sells services not physical goods
B)
the firm needs tight control over a foreign entity to maximize
its market share and earnings in that country
C)
the market in that country is an oligopoly
D)
foreign exchange rates are extremely volatile
6
________________ arise(s) when two or more enterprises encounter each other in
different regional markets, national markets, or industries.
A)
Externalities
B)
Multipoint competition
C)
Location-specific advantages
D)
FDI
7
Knowledge spillovers such as those arising from the concentration of intellectual
talent in Silicon Valley are referred to as ________.
A)
knowledge pools
B)
knowledge bases

C)
D)

knowledge epicenters
externalities

8
______________ is the political ideology most hostile to FDI, and ______________ is the
most supportive of FDI.
A)
The radical view; pragmatic nationalism
B)
Pragmatic nationalism; the free market view
C)
The radical view; the free market view
D)
The free market view; pragmatic nationalism
9
Which of the following is not one of the four main benefits of FDI for a host country?
A)
the resource transfer effect
B)
the employment effect
C)
the balance-of-payments effect
D)
the exchange rate effect
10
If a country
A)
B)
C)
country.
D)
the deficit.

is running a current account deficit:

governments are generally pleased for both the short and long term.
the country is exporting more goods and services than it is importing.
the deficit must be financed by the sales of assets of the
FDI is an important consideration, but it cannot help a country address

11
Home countries can faces costs as well as benefits from FDI, including
______________.
A)
a decrease in the quality of the goods being sold
B)
less control over environmental quality
C)
a loss of sovereignty in terms of the firms' actions and behaviors
D)
employment effects when FDI is seen as a substitute for
domestic production
12
Among the policies countries can take to encourage outward foreign direct
investment are foreign risk insurance, capital assistance, tax incentives, and
___________________.
A)
political pressure
B)
pressure on organized labor to allow the FDI
C)
encouraging subsidies from the host-country governments
D)
transportation subsidies

13
It was not until the 1990s that there was consistent involvement of a multinational
institution in governing FDI. This changed with the formation of _____________.
A)
the OECD
B)
GATT
C)
the WTO
D)
the United Nations Advisory Council on FDI
14
Licensing is a potentially good option for which of the following industries or
industry groups?
A)
High-technology industries
B)
Global oligopolies
C)
The fast food industry
D)
Industries with intense cost pressure which demand tight control
15
When a MNE considering FDI is negotiating with a country about a potential
investment which of the following is the least important factor?
A)
The value each side places on what the other has to offer
B)
The strength of the military and police forces of the country
C)
The number of comparable alternative available to each side
D)
Each party's time horizon

Chapter 9
1
The desire by Europe to hold their own on the world's economic and political stage
prompted the formation of the EU.

A)
B)

True
False

2
NAFTA's initial impact on jobs was very small.
A)
True
B)
False
3
Despite its importance in international trade, China is not a member of any major
free trade agreement.
A)
True
B)
False
4
By 2010, nearly all of the members of the WTO have notified the organization of
their participation in free trade agreements, and the number of these agreements is
around ________.
A)
30
B)
100
C)
200
D)
400
5
Several levels of economic integration are possible. Three such levels from the least
integrated to the most integrated are:
A)
free trade area, customs union, common market.
B)
customs union, political union, economic union.
C)
free trade area, political union, common market.
D)
common market, customs union, political union.
6
Regional economic integration can be seen as an attempt to achieve gains from
________________ beyond those attainable under international agreements such as
the WTO.
A)
common currencies
B)
region-specific tariffs
C)
the free flow of trade and investment
D)
gains from common access to intellectual property
7
One of the main impediments to regional economic integration is the cost that
individuals must bear even while the country as a whole might gain. The second
major impediment is the ______________.

A)
B)
C)
D)

increased concern about monetary policy

loss of national sovereignty
loosening of control over fiscal issues
the increased costs of defending and monitoring borders

8
If, prior to NAFTA, the U.S. produced its own textiles at a higher cost than Mexico,
but after NAFTA imports them from Mexico:
A)
trade has been diverted.
B)
trade has been created.
C)
Mexico is worse off.
D)
the U.S. is worse off.
9
Which institution is responsible for proposing EU legislation, implementing it, and
monitoring compliance?
A)
The European Council
B)
The European Parliament
C)
The Court of Justice
D)
The European Commission
10
In a(n) ________________________, similarities in the underlying structure of economic
activity make it feasible to adopt a single currency and use a single exchange rate
as an instrument of macroeconomic policy.
A)
optimal currency zone
B)
free trade area
C)
customs union
D)
common market
11
Turkey's application to join the European Union has presented the EU with difficult
issues. Which of the following is not one of those issues?
A)
Less than a quarter of Turkey's international trade is with the
EU.
B)
The EU has concerns about human rights violations, especially with the
Kurdish population.
C)
There are suspicions that the EU is concerned because Turkey is
primarily a Muslim nation.
D)
There are concerns because Turkey straddles both Europe and Asia.
12
Progress toward a Free Trade Agreement of the Americas has been slow:

A)
because of debates over intellectual property rights and
agricultural subsidies.
B)
because Brazil is firmly against the idea, yet is the largest economy in
South America.
C)
because the U.S. wants Brazil and Argentina to remove their subsidies
on agricultural products.
D)
because Latin American debt must be paid off in order for this type of
agreement to be successful.
13
African countries have been experimenting with regional trade blocks with the
following result:
A)
The key to effectiveness had been the enthusiastic support of the free
trade movement.
B)
There are nine trade blocks, often with countries members of
more than one block.
C)
The initiatives have been successful because of reduced traditional
rivalries and suspicions.
D)
Most countries are committed to reducing trade barriers to gain the
benefits of freer trade.
14
Regional economic integration, for example, the EU, offers significant opportunities
to US businesses including:
A)
non-EU companies no longer need to set up subsidiaries in EU
countries.
B)
companies can realize significant cost economies by
centralizing operations where factor costs and skills are optimal.
C)
it makes no difference where in the EU one locates an operation since
the costs are the same throughout.
D)
cultural differences and national consumer preferences are now
irrelevant.
15
Regional economic integration presents potentially significant threats to business
outside the area, including:
A)
long-term improvements in the competitive positions of firms
inside the areas.
B)
the end of a "fortress" mentality means other firms outside the area
will be able to enter the areas more easily to compete with existing area firms.
C)
the end to efforts to rationalize production and reduce costs.
D)
the imposition of US standards, recognized as a pioneer in regional
economic integration, which means US firms will not be able to get around the legal
barriers.