International Business Exam Materials
Course Introduction
International Business explores the complexities of conducting commerce across national borders, emphasizing the economic, cultural, legal, and political factors that influence global trade and investment. The course covers essential topics such as international market entry strategies, cross-cultural management, foreign exchange markets, global supply chains, and the evolving roles of multinational corporations. Students will examine real-world case studies and current events to understand how businesses adapt to international environments, manage risks, and leverage opportunities in an increasingly interconnected world. Through a blend of theory and practical application, the course prepares students to navigate and succeed in the global business landscape.
Recommended Textbook
International Business Competing in the Global Marketplace 12th Edition by
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Page 2
Charles W. L. Hill
Chapter 1: Globalization
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Sample Questions
Q1) How does managing an international business differ from managing a domestic business?
A) International managers are more experienced.
B) Countries differ in their cultures and systems.
C) Countries want to do business with their neighbors.
D) Countries want to keep their transactions simple.
Answer: B
Q2) A number of econometric studies have found consistent evidence of a hump-shaped relationship between income levels and pollution levels. According to this, as an economy grows and income levels rise
A) initially the pollution levels remain low.
B) after a while, the pollution levels decrease.
C) the pollution levels also rise in proportion to the economic growth.
D) there is increasing industrialization, which leads to greater pollution.
Answer: B
Q3) According to WTO data, the volume of world merchandise trade has grown faster than the world economy since 1950.
A)True
B)False
Answer: True
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Chapter 2: National Differences in Political, Economic, and Legal Systems
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Q1) The ________ associated with doing business in a country are a function of that country's political, economic, and legal systems.
A) ethical considerations
B) profitability
C) simplicity and ease
D) benefits, costs, and risks
Answer: D
Q2) In a totalitarian country, there are safeguards to protect an individual's right to freedom of expression, opinion, and organization.
A)True
B)False
Answer: False
Q3) Judge Michaels operates in a country with a civil law system. This system has more flexibility than a common law system.
A)True
B)False
Answer: False
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Chapter 3: National Differences in Economic Development
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Q1) One of the reasons for the spread of democracy is the emergence of ________ who have pushed for democratic reforms.
A) a more vocal working poor
B) better educated lower classes
C) a desperate urban poor
D) increasingly prosperous middle and working classes
Answer: D
Q2) In mixed economies, in certain sectors the state sets prices, owns businesses, limits private enterprise, restricts investment by foreigners, and restricts international trade.
A)True
B)False
Answer: True
Q3) Why does education lead to economic development?
Answer: Nations that invest more in education will have higher growth rates because an educated population is a more productive population. A survey of 14 statistical studies that looked at the relationship between a country's investment in education and its subsequent growth rates concluded investment in education did have a positive and statistically significant impact on a country's rate of economic growth.
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Chapter 4: Differences in Culture
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Q1) Discuss the relationship between society and the nation-state.
Q2) Which of the following statements about the use of spoken language is true?
A) The nature of a language has no effect on the way we perceive the world.
B) The language of a society does not direct the attention of its members to certain features of the world rather than others.
C) Countries with more than one language often only have one culture.
D) Most people prefer to converse in their own language rather than English.
Q3) Which of the following is an example of ethnocentrism?
A) A manager in India looks down upon his subordinates because they are from a lower caste, compared to him.
B) An upper-middle-class woman talks rudely to a salesperson, because she looks down upon individuals belonging to the working class.
C) An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms.
D) A French business owner, who plans to expand his market to China, conducts a detailed cultural study of China to customize his marketing campaign.
Q4) What are the implications of cultural differences for international businesses?
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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Q1) Corporations can contribute to the global tragedy of the commons by not pumping pollutants into the atmosphere or dumping them in oceans or rivers.
A)True
B)False
Q2) The veil of ignorance was developed by ________ as part of his approach to justice theories.
A) Milton Friedman
B) John Rawls
C) Kantian
D) Leon Sullivan
Q3) Companies can strengthen the ________ of employees by committing themselves to not retaliate against employees who complain about unethical actions.
A) moral courage
B) code of ethics
C) ethical strategies
D) organizational culture
Q4) In your opinion, are bribes ever acceptable? Why or why not?
Q5) Should a multinational feel free to pollute in a developing nation?
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Q6) Discuss the notion of social responsibility. What does it mean for corporations?
Chapter 6: International Trade Theory
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Sample Questions
Q1) The simple model of free trade assumed away transportation costs between countries.
A)True
B)False
Q2) Factor endowments refer to the extent to which a country
A) supports education, research, and development.
B) develops the infrastructure to support industrialism.
C) supports free trade.
D) has such resources as land, labor, and capital.
Q3) The simple comparative advantage model assumed that trade
A) changes efficiency with which a country utilizes resources.
B) changes a country's stock of resources.
C) allows for dynamic changes in the marketplace.
D) does not change a country's stock of resources.
Q4) Explain how the rivalry within an industry affects international competence.
Q5) How does the Heckscher-Ohlin theory explain international trade?
Q6) Mercantilist doctrine advocates unrestricted free trade between countries.
A)True
B)False
Q7) Explain how the principle of diminishing returns weakens the Ricardian model.
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Chapter 7: Government Policy and International Trade
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Sample Questions
Q1) According to the ________ argument, governments should temporarily support new industries until they have grown strong enough to meet international competition.
A) retaliatory action
B) human rights
C) infant industry
D) antidumping
Q2) In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of
A) an ad valorem tariff.
B) a subsidy.
C) dumping.
D) an import quota.
Q3) The WTO does not have the power to impose trade sanctions.
A)True
B)False
Q4) Compare and contrast import quotas and voluntary export restraints.
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Chapter 8: Foreign Direct Investment
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Q1) According to Knickerbocker's theory
A) when a firm has valuable know-how that cannot be adequately protected by a licensing contract, it engages in FDI.
B) when a firm's skills and know-how are not amenable to licensing, it usually prefers the FDI route.
C) by placing tariffs on imported goods, governments indirectly increase the cost of exporting relative to foreign direct investment and licensing.
D) when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments.
Q2) The pragmatic nationalist view highlights ________ of FDI.
A) only the benefits
B) only the costs
C) both the benefits and costs
D) neither the benefits nor the costs
Q3) The amount of foreign direct investment (FDI) undertaken over a given time period is known as the flow of FDI.
A)True
B)False
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Chapter 9: Regional Economic Integration
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Q1) What is the Single European Act? What was the effect of the Single European Act on the EU economy? Did the Single European Act achieve its goals?
Q2) Which of the following is seen as a benefit of the euro?
A) governments gaining greater control over their monetary policies
B) reduced competition in most industries
C) zero interest expense for businesses
D) lower foreign exchange and hedging costs
Q3) Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.
A)True
B)False
Q4) ________ eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.
A) A free trade area
B) A common market
C) An economic union
D) A customs union
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Chapter 10: The Foreign Exchange Market
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Sample Questions
Q1) Arbitrage opportunities in foreign exchange markets tend to be small and disappear quickly.
A)True
B)False
Q2) It follows from the Fisher Effect that if the real interest rate is the same worldwide, any difference in interest rates between countries reflects differing expectations about A) foreign exchange rates.
B) inflation rates.
C) unemployment rates.
D) GDP growth rates.
Q3) Assume that the current exchange rate is 1 = $1.50. If you exchange 1,000 euros for dollars, you will receive
A) $1,000.
B) $750.
C) $1,500.
D) $667.
Q4) Explain the difference between fundamental analysis and technical analysis.
Q5) Explain the notion of economic exposure. How can economic exposure be minimized?
Q6) What is the law of one price?
Page 12
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Chapter 11: The International Monetary System
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Sample Questions
Q1) The current system of foreign exchange is a mixed system of government intervention and speculative activity.
A)True
B)False
Q2) ________ limits the ability of the government to print money and, thereby, create inflationary pressures.
A) A dirty-float system
B) A managed-float system
C) The European Monetary System
D) A currency board system
Q3) Which of the following statements is true of pegged exchange rates?
A) A pegged exchange rate allows a country's currency to be determined by market forces.
B) A pegged exchange rate weakens the monetary discipline of a country.
C) Pegged exchange rates are popular among many of the world's smaller nations.
D) Adopting a pegged exchange rate regime increases inflationary pressures in a country.
Q4) Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.
A)True
B)False
Page 13
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Chapter 12: The Global Capital Market
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Sample Questions
Q1) There is a low correlation between the movement of stock markets in two different countries. What are the two factors that influence this?
Q2) Hedge funds
A) are public investment funds that invest in corporate bonds and shares.
B) make long bets rather than short bets.
C) are investment funds managed by the government.
D) make short bets on assets that they think will decline in value.
Q3) Which of the following statements is true of Eurocurrency?
A) The Eurocurrency market is a relatively high-cost source of funds.
B) It is produced and banked within European countries.
C) Eurocurrency can be created anywhere in the world.
D) It is used only for internal transactions within European Union.
Q4) As investors increase the number of stocks in their portfolio, the portfolio's risk
A) increases initially and declines later.
B) declines slowly and steadily.
C) increases exponentially.
D) declines rapidly in the beginning.
Q5) Briefly describe the trends observed in the global deregulation of financial services.
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Chapter 13: The Strategy of International Business
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Sample Questions
Q1) ________ imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires significant additional costs.
A) Efficiency matrixes
B) Diminishing returns
C) Cost plus curves
D) Strategy convex curves
Q2) Economies of scale arise from which of the following sources?
A) increasing fixed costs by limiting them to small volumes
B) serving domestic and international markets from the same production facilities
C) serving only domestic markets
D) bargaining with distributors to drive up the product costs
Q3) The skills within the firm that a competitor cannot easily match or imitate are known as the core knowledge base.
A)True
B)False
Q4) Consider a transnational strategy. Why would a firm choose this strategic alternative? What are the disadvantages of this strategy?
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Chapter 14: The Organization of International Business
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Q1) Refreezing an organization should happen quickly.
A)True
B)False
Q2) ________ control is achieved by comparing actual performance against targets and intervening selectively to take corrective action.
A) Personal
B) Output
C) Bureaucratic
D) Cultural
Q3) In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities.
A)True
B)False
Q4) Which of the following is true regarding a worldwide area structure?
A) It tends to be favored by firms with a high degree of diversification.
B) It inhibits local responsiveness.
C) It tends to be favored by firms with a domestic structure based on functions.
D) Decision-making responsibilities are centralized.
Q5) What are the basic principles for successful organizational change?
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Chapter 15: Entry Strategy and Strategic Alliances
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Sample Questions
Q1) Large-scale strategic commitments may
A) have many benefits and few to no risks.
B) increase strategic flexibility.
C) have many risks and few to no benefits.
D) limit strategic flexibility.
Q2) Under ________ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.
A) an integrated licensing
B) a chartering
C) a franchising
D) a cross-licensing
Q3) According to the ________, top managers typically overestimate their ability to create value from an acquisition.
A) misvaluation theory
B) performance extrapolation hypothesis
C) market timing theory
D) hubris hypothesis
Q4) Compare and contrast licensing agreements and franchising agreements.
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Chapter 16: Exporting, Importing, and Countertrade
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Sample Questions
Q1) Why is there a problem of trust that persists in international business?
Q2) Explain why barter is viewed as the most restrictive countertrade arrangement.
Q3) Describe the 14 steps in a typical international trade transaction.
Q4) Which of the following is an advantage of countertrade?
A) Countertrade uses instruments such as time drafts and sight drafts.
B) It is an effective way of doing business with developing nations.
C) It provides exporters an opportunity to obtain direct revenue.
D) Countertrade prevents the exchange of unusable or poor-quality goods.
Q5) What is a disadvantage of countertrade?
A) Countertrade contracts may involve the exchange of unusable or poor-quality good.
B) Countertrade requires the firm to use an out-of-house trading company to which much of the profit will go.
C) Countertrade contracts often involve high-quality, expensive goods that the firm cannot move enough of to be profitable.
D) Countertrade requires employing lawyers who specialize in these unique types of contracts.
Q6) Discuss the importance of the Export-Import Bank, its goals, and its operations.
Q7) What type of firm is most likely to engage in countertrade? Why?
Page 18
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Chapter 17: Global Production and Supply Chain Management
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Q1) ________ allows the company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.
A) Standardization
B) Kaizen
C) Six Sigma
D) Lean production
Q2) Which of the following is a characteristic of manufacturing technology that can be pivotal in deciding where to locate an international business?
A) exchange rates that govern the business
B) relative factors cost in the locality
C) availability of a skilled labor pool
D) fixed costs of setting up a production plant
Q3) Explain make-or-buy decisions by giving an example of an international business that must decide whether to outsource an activity.
Q4) Modern consumer products such as personal computers serve universal needs. A)True
B)False
Q5) Explain how fixed costs impact the decision to where to locate a plant.
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Chapter 18: Global Marketing and R&D
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Sample Questions
Q1) When a channel is exclusive
A) the firm sells and distributes only high-end products.
B) it is controlled by market leaders or by firms who have a niche market.
C) the firm's products are focused only on elite, upper class customers.
D) it is often difficult for a new firm to get access to shelf space in supermarkets.
Q2) Which of the following is one of the important factors in determining the elasticity of demand for a product in a given country?
A) personal selling
B) logistics
C) operating revenue
D) income level
Q3) A pull strategy should be used when
A) the firm is selling industrial products.
B) the distribution channels are short.
C) the distribution channels are long.
D) few print or electronic media are available.
Q4) Differentiate between multipoint pricing and experience curve pricing strategies.
Q5) What is Theodore Levitt's contribution to international business?
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Chapter 19: Global Human Resource Management
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Sample Questions
Q1) Mendenhall and Oddou identified cultural toughness as one of the dimensions in their study on dimensions that predict success in foreign jobs postings. This dimension refers to the
A) expatriate's self-esteem, self-confidence, and mental well-being.
B) expatriate's ability to interact effectively with host-country nationals.
C) expatriate's ability to understand why people of other countries behave the way they do.
D) relationship between the country of the assignment and how well an expatriate adjusts to a particular posting.
Q2) How can the polycentric approach to staffing result in the creation of a "federation" within the firm? Why is this a disadvantage for the firm?
Q3) Bringing managers together in one location for extended periods and rotating them through different jobs in several countries helps the firm build
A) an expatriate community.
B) a formal management network.
C) an inpatriate community.
D) an informal management network.
Q4) How can firms reduce the bias in performance appraisals of expatriate managers?
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Page 21
Chapter 20: Accounting and Finance in the International Business
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Q1) Firms use fronting loans to
A) avoid host-country restrictions on the remittance of funds from a foreign subsidiary.
B) implement a cost-based and fair pricing policy across an international business.
C) increase the profit center revenue of a subsidiary functioning in another country.
D) implement a market-driven and fair pricing policy across an international business.
Q2) Compliance to IASB standards is
A) mandatory for countries that want to engage in international trade.
B) enforced through the World Trade Organization.
C) voluntary.
D) enforced through the United Nations.
Q3) A tax haven is a country
A) where companies benefit from establishing fully operating subsidiaries.
B) that does not charge local companies for importing products from other countries.
C) that does not charge taxes on the purchase or sale of any items.
D) with an exceptionally low, or even no, income tax.
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