International Business Law
Exam Solutions
Course Introduction
International Business Law offers an in-depth exploration of the legal principles and frameworks that govern cross-border commercial transactions. The course examines key topics such as international contracts, trade regulations, dispute resolution mechanisms, intellectual property, and the legal implications of operating in multiple jurisdictions. Students will analyze treaties, conventions, and case law to understand how multinational businesses navigate regulatory environments, manage risks, and ensure compliance in global markets. Through case studies and practical examples, the course prepares students to effectively deal with the legal challenges faced by international organizations.
Recommended Textbook
International Business Competing in the Global Marketplace 10th Edition by Charles
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Page 2
W. L. Hill
Chapter 1: Globalization
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Sample Questions
Q1) Explain how a company competes using outsourcing. Provide an example. Answer: The lowering of trade and investment barriers also allows firms to base production at the optimal location for that activity. Thus, a firm might design a product in one country, produce component parts in two other countries, assemble the product in yet another country, and then export the finished product around the world. For example, consider Boeing's 777, a commercial jet airliner. Eight Japanese suppliers make parts for the fuselage, doors, and wings; a supplier in Singapore makes the doors for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on. In total, some 30 percent of the 777, by value, is built by foreign companies.
Q2) A multinational enterprise (MNE) is a firm that ____.
A) exports its products to multiple countries
B) has production units in more than two countries
C) does most of its business on the Internet
D) lists its securities on a public exchange Answer: B
Q3) Outsourcing is a process that is limited to manufacturing enterprises.
A)True
B)False
Answer: False
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Page 3
Chapter 2: National Differences in Political Economy
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102 Verified Questions
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Sample Questions
Q1) Which of the following statements about the legal systems of countries is NOT true?
A) They can affect the attractiveness of a country as an investment site or market.
B) They are influenced by the prevailing political system of the country.
C) They are almost the same for all countries.
D) They are of immense importance to international business.
Answer: C
Q2) The tenet of _____ is that the welfare of society is best served by letting people pursue their own economic self-interest.
A) socialism
B) communism
C) anarchism
D) individualism
Answer: D
Q3) Aristotle argued that individual diversity and private ownership are undesirable.
A)True
B)False
Answer: False
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Chapter 3: Political Economy and Economic Development
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Q1) Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation, and entrepreneurial activity in developing nations.
A)True
B)False Answer: True
Q2) GNI and PPP data are useful because they provide a dynamic analysis of economic development.
A)True
B)False Answer: False
Q3) It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.
A)True
B)False
Answer: True
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Chapter 4: Differences in Culture
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Sample Questions
Q1) Hofstede's uncertainty avoidance dimension considered:
A) the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty.
B) the relationship between gender and work roles.
C) how a society deals with the fact that people are unequal in physical and intellectual capabilities.
D) the relationship between the individual and his or her fellows.
Q2) Hofstede's research has been criticized because it was culturally bound.
A)True
B)False
Q3) The _____ dimension of Hofstede's study explores how a society deals with the fact that people are unequal in physical and intellectual capabilities.
A) power distance
B) individualism versus collectivism
C) uncertainty avoidance
D) masculinity versus femininity
Q4) What is Buddhism? Compare Buddhism with Hinduism.
Q5) Discuss why the stratification of a society is important to business.
Q6) Discuss the relationship between culture and national competitive advantage?
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Chapter 5: Ethics in International Business
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Sample Questions
Q1) The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business.
A)True
B)False
Q2) The Friedman doctrine is the belief that ethics are nothing more than a reflection of culture and therefore, a firm should adopt the ethics of the culture in which it is operating.
A)True
B)False
Q3) The ethical obligations of a multinational corporation toward employment conditions, human rights, environmental pollution, and the use of power are always clear-cut.
A)True
B)False
Q4) Discuss how companies such as Exxon, Kodak, and IBM helped improve human rights in South Africa.
Q5) What are business ethics? What is the relationship between business ethics and an ethical strategy?
Q6) Discuss the notion of social responsibility. What does it mean for corporations?
Page 7
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Chapter 6: International Trade Theory
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Sample Questions
Q1) A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.
A)True
B)False
Q2) The production possibility frontier will be convex if constant return to specialization is observed.
A)True B)False
Q3) According to Adam Smith, A country should specialize in the production of a good when it has ____.
A) an absolute advantage in the production of the good B) a strong domestic demand for the good C) the ability to help country increase its national output D) the necessary raw materials for production
Q4) According to Ricardo's theory of comparative advantage, countries should produce all the products for which they have an absolute advantage. A)True
B)False
Q5) Explain the concept of free trade.
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Chapter 7: The Political Economy of International Trade
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Q1) One issue at the forefront of the current agenda of the WTO is the increase in tariff rates on nonagricultural goods and services in many nations.
A)True
B)False
Q2) Specific tariffs are levied as a proportion of the value of the imported good.
A)True
B)False
Q3) During the 1980s and early 1990s, the world trading system erected by the GATT gained momentum as protectionist demands generally decreased across the world.
A)True
B)False
Q4) A common hybrid of a quota and a rent is known as a quota rent.
A)True
B)False
Q5) Under a tariff rate quota, a higher tariff rate is applied to imports within the quota than those over the quota.
A)True
B)False
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Chapter 8: Foreign Direct Investment
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Sample Questions
Q1) When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments?
A) Greenfield investments are characterized by reduced management control.
B) Mergers and acquisitions are preferred because most greenfield investments fail.
C) It is easier and less risky for a firm to build strategic assets than acquire similar assets.
D) Mergers and acquisitions are quicker to execute than greenfield investments.
Q2) A country's _____ keeps track of its payments to and its receipts from other countries.
A) federal payments ledgers
B) concurrent accounts
C) checks-and-balances accounts
D) balance-of-payments accounts
Q3) Research supports the view that multinational firms often transfer significant technology when they invest in a foreign country.
A)True
B)False
Q4) Describe the situations when licensing is not a good option for a firm.
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Chapter 9: Regional Economic Integration
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Sample Questions
Q1) The implied loss of national sovereignty to the ECB underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now.
A)True
B)False
Q2) Because of the fact that everyone benefits from economic integration, it is easy to achieve and sustain.
A)True
B)False
Q3) Which feature of an economic union differentiates it from a common market?
A) Free flow of products and factors of production between member countries
B) A common monetary and fiscal policy
C) A common external trade policy toward nonmembers
D) Ability of factors of production to move freely between members
Q4) 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?
Q5) What are the five levels of economic integration? Briefly describe each form.
Q6) Discuss the economic case for economic integration. How does it relate to trade theory?
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Chapter 10: The Foreign Exchange Market
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Sample Questions
Q1) Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate. Using the concept of purchasing power parity, the euro is:
A) undervalued by 25 percent against the dollar.
B) overvalued by 25 percent against the dollar.
C) appreciating relative to the dollar.
D) depreciating relative to the dollar.
Q2) Which of the following would a follower of the inefficient market school of thought agree with?
A) Companies would be better off investing in foreign exchange forecasting services.
B) Forward exchange rates do the best possible job of forecasting future spot exchange rates.
C) Companies can optimize their foreign exchange transactions by using forward markets.
D) Forward rates reflect all available information about likely future changes in exchange rates.
Q3) What are the main uses of foreign exchange markets for international business?
Q4) What is a currency swap?
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Page 12
Chapter 11: The International Monetary System
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Sample Questions
Q1) With the help of an example, explain how balance-of-trade equilibrium is maintained under the gold standard.
Q2) Which of the following is NOT a characteristic of a foreign debt crisis?
A) Widening current account deficit
B) Excessive expansion of domestic borrowing
C) Low relative price inflation rates
D) Asset price inflation
Q3) Compare and contrast a pegged exchange system with a dirty float system of exchange rates.
Q4) Identify the currency that was convertible to gold under the Bretton Woods system.
A) Pound
B) Yen
C) Euro
D) Dollar
Q5) What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?
Q6) Identify the multinational institutions that were established at the Bretton Woods agreement. What were their roles in the international monetary system?
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Chapter 12: The Global Capital Market
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Sample Questions
Q1) Describe the factors that make the Eurobond market attractive.
Q2) Which of the following is a disadvantage of global capital market?
A) Foreign investments may be driven by speculative flows in the market.
B) A truly global market reduces the liquidity of investments.
C) The availability of capital is low in a global capital market.
D) The cost of capital is more in a global market than a domestic market.
Q3) When value of U.S. dollars goes down, ____.
A) bonds that are denominated in dollar will produce more returns
B) foreign depositors in the U.S will benefit
C) foreign borrowers will garner benefits
D) investors tend to favor bonds that are denominated in dollar
Q4) A Eurocurrency is the currency used by the countries of the European Union.
A)True
B)False
Q5) Companies receive a higher interest rate on deposits and pay less for loans when using the Eurocurrency market.
A)True
B)False
Q6) Explain how equity loans and debt loans differ in terms of attractiveness to businesses.
Page 14
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Chapter 13: The Strategy of International Business
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Sample Questions
Q1) How can the marketing and sales functions of a firm create value?
Q2) Moving down the experience curve:
A) increases the cost of a firm's raw material.
B) allows a firm to reduce its cost of creating value.
C) decreases a firm's profitability.
D) increases the R & D expenditure of a firm.
Q3) The preeminent strategic goal for most firms is to maximize the value of the firm for its owners.
A)True
B)False
Q4) Enterprises that pursue an international strategy tend to decentralize control over marketing and product strategies.
A)True
B)False
Q5) Which of the following is less likely to add to the pressure for a firm to be locally responsive?
A) National differences in consumer tastes and preferences
B) Differences in infrastructure and traditional practices
C) Switching costs for consumers
D) Host-government demands
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Chapter 14: The Organization of International Business
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Sample Questions
Q1) The worldwide product division structure facilitates local responsiveness.
A)True
B)False
Q2) In a company using cultural controls, employees' behavior is closely monitored and controlled through direct supervision.
A)True
B)False
Q3) A firm that needs greater flexibility should choose _____ for its decision-making.
A) horizontal differentiation
B) decentralization
C) localization strategy
D) control systems
Q4) To unfreeze the established culture of an organization the company must take bold steps such as shaking up the management structure in order to implement change.
A)True
B)False
Q5) What are the formal integrating mechanisms used to integrate subunits?
Q6) Discuss the issues involved in refreezing an organization.
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Chapter 15: Entry Strategy and Strategic Alliances
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Sample Questions
Q1) Contractual safeguards cannot be written into an alliance agreement to guard against the risk of opportunism by a partner.
A)True
B)False
Q2) To increase the potential for a successful acquisition, a firm should:
A) always bid low to allow for partial failure.
B) try to acquire a firm with a very different corporate culture so there is no forced "overlap."
C) screen the foreign enterprise to be acquired.
D) seek companies only from similar national cultures.
Q3) What are the two methods of entering foreign marketing using a wholly owned subsidiary?
Q4) What is a joint venture? What type of joint venture is most common? Provide an example of a joint venture.
Q5) In a ____, the firm owns 100 percent of the stock.
A) joint venture
B) wholly owned subsidiary
C) turnkey project
D) franchising agreement
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Chapter 16: Exporting, Importing, and Countertrade
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Sample Questions
Q1) Which of the following is a major advantage of using a letter of credit?
A) It gives the importer time to resell the merchandise before payment.
B) It guarantees the exporter pre-export financing.
C) It helps international traders engage in trade with trust.
D) It guarantees the importer extra funds for other purposes.
Q2) Nearly every state in the U.S. maintains active trade commissions to promote exports.
A)True
B)False
Q3) When a time draft is drawn on and accepted by a business firm, it is called a trade acceptance.
A)True
B)False
Q4) Exporters usually issue a letter of credit to importers in international transactions.
A)True
B)False
Q5) A bill of lading serves as a receipt, a contract, and a document of title.
A)True
B)False
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Chapter 17: Global Production, Outsourcing, and Logistics
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Sample Questions
Q1) One way to reduce risks associated with a JIT global supply chain is to source inputs from several suppliers located in different countries.
A)True
B)False
Q2) Just-in-time systems are used to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before.
A)True
B)False
Q3) Outsourcing some manufacturing to independent suppliers based in other countries would help firms capture more orders from that country.
A)True
B)False
Q4) The level of output at which most plant-level scale economies are exhausted is referred to as the minimum efficient scale of output.
A)True
B)False
Q5) Briefly describe the Six Sigma methodology.
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Chapter 18: Global Marketing and RD
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Sample Questions
Q1) In a concentrated retail system, there are many retailers but none of them have a significant share of the market.
A)True
B)False
Q2) The probability of effective communications is reduced by:
A) noise.
B) location effects.
C) country of origin effects.
D) source effects.
Q3) ____ refers to the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses.
A) Channel exclusivity
B) Channel knowledge
C) Channel quality
D) Channel skill
Q4) A push strategy makes sense when distribution channels are short.
A)True
B)False
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) A hardship allowance is paid:
A) when the expatriate is being sent to a location where such basic amenities are grossly deficient by the standards of the expatriate's home country.
B) to ensure that an expatriate's children receive adequate schooling (by home-country standards).
C) to ensure that the expatriate will enjoy the same standard of living in the foreign posting as at home.
D) to ensure that the expatriate can afford the same quality of housing in the foreign country as at home.
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Chapter 20: Accounting and Finance in the International Business
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Sample Questions
Q1) Explain the impact of transaction costs in international business.
Q2) Transfer price refers to the _____.
A) price at which goods and services are transferred to a subsidiary
B) price at which the title of products is transferred to a customer
C) price at which a supplier provides raw materials to a firm
D) cost incurred when goods or services are transferred from one place to another
Q3) Which of the following statements is true of the capital budgeting used in international businesses?
A) Capital budgeting does not provide connection between cash flows to the parent and subsidiaries.
B) Its basic framework is vastly different from the framework of domestic capital budgeting.
C) Capital budgeting does not consider the cash flows between subsidiaries of a firm.
D) It enables top managers to compare different investment alternatives in an objective fashion.
Q4) Describe three factors that complicate the process of an international business.
Q5) Describe the three exchange rates that Lessard and Lorange pointed out.
Page 22
Q6) Briefly differentiate accounting standards and auditing standards.
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