International Economics
Final Test Solutions
Course Introduction
International Economics explores the principles and dynamics governing trade and financial relations among countries. The course covers fundamental theories of international trade, examines the effects of tariffs and quotas, and analyzes patterns of global economic integration. Students study balance of payments, exchange rate systems, and the implications of international monetary policies. The course also addresses contemporary issues such as globalization, trade agreements, and the roles of international organizations, equipping students with a comprehensive understanding of how economic activity and policy transcend national borders.
Recommended Textbook
International Business The Challenge of Global Competition 13th Edition by Donald Ball\
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Page 2
Chapter 1: The Challenging World of International Business
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Sample Questions
Q1) Globalization has produced uneven results across nations and people.
A)True
B)False
Answer: True
Q2) As stated in the text, an international business is:
A) a business whose activities involve crossing national borders.
B) the operations of a company outside its home or domestic market.
C) an organization with multicountry affiliates that each formulate their own business strategy.
D) an organization that attempts to standardize operations worldwide.
E) all of the above.
Answer: A
Q3) Internal environmental forces are commonly referred to as controllable.
A)True
B)False
Answer: True
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Page 3
Chapter 2: International Trade and Foreign Direct Investment
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Sample Questions
Q1) To sum up international trade theory, we can say that the primary reason for trade is:
A) the increase in OPEC oil prices.
B) governments want to accumulate money.
C) the existence of price differentials among nations.
D) the creation of new nations from former colonies.
E) none of the above.
Answer: C
Q2) Michael Porter claims that demand conditions, factor conditions, related and supporting industries, and firm strategy, structure, and rivalry, rather than government and chance, are factors that affect national competitiveness.
A)True
B)False
Answer: False
Q3) The level of merchandise exports coming from Africa decreased between 1980 and 2010.
A)True
B)False
Answer: False
Page 4
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Chapter 3: International Institutions From an International Business Perspective
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Sample Questions
Q1) Informal institutions are composed of sets of:
A) mandatory agreements, a bit like the mind's software.
B) orthodox accords whose goal is to establish rigor.
C) agreements that are for the most part written and taken for granted.
D) voluntary agreements.
Answer: D
Q2) The IMF initially played a central role in:
A) establishing trade initiatives through GAAP measures.
B) supporting war-torn nations of Europe as they recovered from their devastation.
C) setting fixed exchange rates among nations' currencies with an established par value based on gold.
D) the monitoring of EU initiatives to restrain trade with South Africa.
Answer: C
Q3) The Bretton Woods Conference established the European Union currency, the euro.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Sociocultural Forces
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Sample Questions
Q1) In Hall's use, context is the irrelevant environment in a communication act.
A)True
B)False
Q2) Referring to Hall's high-and low-context framework, in a high-context culture,
A) communication is explicit.
B) the context carries much of the communication.
C) communication is direct and focused on the topic.
D) the context is irrelevant.
Q3) Hall's high-and low-context framework is based upon communication styles.
A)True
B)False
Q4) Gift-giving in many cultures is marked by:
A) specific etiquette and meaning that may be markedly different from what the international manager knows in the home culture.
B) graft and corruption; for example, a way to launder money.
C) humility not fitting an international manager.
D) drinking and late parties.
Q5) Discuss Hall's high- and low-context framework, and suggest how it might be useful in an international business situation.
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Chapter 5: Natural Resources and Environmental Sustainability
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Sample Questions
Q1) The largest portion of proven oil reserves can be categorized as being at the highest level of investment risk.
A)True
B)False
Q2) The stakeholder model requires businesses to think about:
A) the stakeholders' interest in profitability.
B) the network of tensions caused by competing demands.
C) strategy in light of sustainability.
D) the frequency of social issues faced by the stakeholders.
Q3) Climate is probably the most important element of the physical forces, as it sets the limits on:
A) annual rainfall, and thus water supply.
B) population growth patterns.
C) what people can do physically and economically.
D) expected FDI.
Q4) Nations whose mountains divide them into smaller regional areas include:
A) the United States, Mexico, and Canada.
B) Switzerland, Afghanistan, China, and Colombia.
C) Luxembourg, France, and Romania.
D) Estonia, Latvia, and Lithuania.
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Chapter 6: Political and Trade Forces
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Sample Questions
Q1) Nonquantitative nontariff barriers:
A) are seen by many to be the most significant nontariff barrier.
B) often involve government participation in trade, especially in customs and other administrative procedures.
C) often involve standards.
D) all of the above.
E) two of A, B, and C.
Q2) One example of nationalization of private companies is the nationalization of French-owned firms in Europe after World War II.
A)True
B)False
Q3) The owners of private companies sometimes complain that government-owned companies have unfair advantages. Discuss some of these complaints.
Q4) A comparison based on hourly wages is a reasonable guide to a need to protect domestic jobs.
A)True
B)False
Q5) What is dumping, and why is it found to be problematic?
Q6) Discuss barriers to trade, using examples to illustrate your points.
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Chapter 7: Intellectual Property and Other Legal Forces
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Sample Questions
Q1) Many U.S. laws affect activities of international firms, and their impacts have been coordinated.
A)True
B)False
Q2) How are antitrust laws enforced?
Q3) Patent trolls are:
A) a record of all patents, recorded by the UN.
B) the numerical controls issued on patents, standardized by the Paris Convention.
C) the organizing system for patent review that is kept internationally by the OECD.
D) modern highway robbers who exploit loopholes in IP protection.
E) the framework used for filing and referencing patents.
Q4) The main source(s) of international law is(are):
A) the UN International Court of Justice.
B) the U.S. Supreme Court and the EU Court of Justice.
C) bilateral and multilateral treaties, along with customary law.
D) nonexistent.
E) the WIPO.
Q5) What is international law?
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Chapter 8: The International Monetary System and Financial Forces
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Sample Questions
Q1) Allied and Axis governments met in Bretton Woods in the final days of World War II.
A)True
B)False
Q2) The three major taxes governments use to generate revenue are:
A) VAT, income tax, and withholding tax.
B) sales tax, VAT, and income tax.
C) property tax, VAT, and sales tax.
D) income tax, property tax, and sales tax.
Q3) Withholding tax is:
A) an indirect tax paid by employers before employees receive salaries.
B) a direct tax levied on earned income.
C) a 30 percent tax levied on foreign residents.
D) an indirect tax levied on passive income.
Q4) The forward currency market:
A) allows purchasers to lock in purchases of currencies at known rates.
B) provides governments a way to manage their currency's value.
C) makes trading in several currencies more efficient.
D) helps managers manage domestic debt.
Q5) How might inflation influence the firm in its foreign markets?
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Chapter 9: International Competitive Strategy
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Q1) A benefit of global strategies is their ability to adjust quickly and effectively to changes in customer needs across national or regional markets.
A)True
B)False
Q2) Plans for the best-or worst-case scenarios or for critical events that could have a severe impact on the firm are known as:
A) scenario plans.
B) strategic plans.
C) contingency plans.
D) emergency plans.
E) none of the above.
Q3) When a company faces strong pressures for reducing costs and limited pressure to adapt products for local markets, it should tend to use a:
A) global strategy.
B) multidomestic strategy.
C) transnational strategy.
D) differentiation strategy.
E) home replication strategy.
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11
Chapter 10: Organizational Design and Control
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Q1) A matrix organization involves two or more dimensions, such as area and product, in which managers are at the same level but do not have overlapping responsibilities.
A)True
B)False
Q2) Advantages of the virtual corporation concept include that it allows a company to build competence from the ground up and to increase management's control over the corporation's activities.
A)True
B)False
Q3) What are the four primary dimensions that need to be considered when designing the structure of an international company, and why are they important?
Q4) Pricing that is established for transactions between members of the enterprise is called transfer pricing.
A)True
B)False
Q5) Describe the global product form, explain why a company might adopt this form, and identify the disadvantages of this structure.
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Page 12
Chapter 11: Global Leadership Issues and Practices
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Sample Questions
Q1) Included in the differences between a traditional team and a global team is the difference between:
A) one economic condition and many dissimilar economic conditions.
B) virtual and actual relationships.
C) hierarchy and flat structures.
D) individual and group goals.
E) assertive and aggressive goal setting.
Q2) Among the skills necessary for a global leader are cultural adaptability and an ability to build global teams.
A)True
B)False
Q3) A global mindset involves:
A) a good, fundamental understanding of geography.
B) solid training in foreign languages and geography.
C) an openness to diversity and inclination to synthesize across its borders.
D) early foreign experiences.
E) A and D
Q4) What advice would you give to a friend who wants to develop global leadership skills and is an English major?
Q5) What are the differences between traditional and global teams?
Page 13
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Chapter 12: Assessing International Markets
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Sample Questions
Q1) Market indicators measure relative market weaknesses.
A)True
B)False
Q2) Market screening is a modified version of environmental scanning in which the firm studies the stock market to eliminate the less desirable markets.
A)True
B)False
Q3) The segment approach to investigating markets requires that markets should be which of the following?
A) Large
B) Protected
C) Capturable
D) All of the above
E) A and C
Q4) Discuss the use of market indicators.
Q5) Discuss why imports do not completely measure market potential.
Q6) Estimation by analogy is an example of a market factor.
A)True
B)False
Page 14
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Chapter 13: Entry Modes
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Sample Questions
Q1) Foreign direct investment (FDI) includes all of the following except:
A) wholly owned subsidiary.
B) joint venture.
C) management contract.
D) strategic alliance.
E) none of the above. (All four are included within foreign direct investment.)
Q2) A pioneering firm stands the best chance for long-term success in market-share leadership and profitability when:
A) there are few cultural barriers to entry.
B) the firm has sufficient size, resources, and competencies.
C) there is high potential for imitation.
D) all of the above.
E) two of A, B, and C.
Q3) Historically, firms engaged in FDI have generally preferred wholly owned subsidiaries.
A)True
B)False
Q4) What is contract manufacturing, and what are the ways in which international firms employ contract manufacturing?
Q5) What are the disadvantages of joint ventures?
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Chapter 14: Export and Import Practices
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Sample Questions
Q1) LASH and RO-RO are:
A) innovative material-handling methods.
B) kinds of containerization.
C) Panamax ships.
D) barges used in materials handling.
E) Japanese import requirements.
Q2) The total number of Incoterms as of 2011 is:
A) 11.
B) 25.
C) 15.
D) variable. (They vary as need dictates.)
E) 45
Q3) The Panama Canal:
A) has to be enlarged for larger ship sizes.
B) increases shipping costs from New York to Los Angeles.
C) can handle Panamax-size ships.
D) makes shipping competitive with air freight.
E) reduces travel time between the U.S. West Coast and Europe by 21 days.
Q4) How do U.S. nonexporting firms often explain their avoidance of foreign markets?
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Chapter 15: Marketing Internationally
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Sample Questions
Q1) The extent of the changes in the marketing mix a firm must make when going overseas depends on the country, the political forces, and the degree of market penetration desired by management.
A)True
B)False
Q2) In a code law country, a brand name belongs to the:
A) person registering it first.
B) person who uses it first.
C) company that uses it first.
D) person who registers it first under the Berlin Convention. E) none of the above.
Q3) The physical product includes the total product, brand name, accessories, after-sales service, warranty and instructions for use, company image, and package.
A)True
B)False
Q4) Identify the appealing factors of online advertising in the international sphere, as discussed in the text.
Q5) Why is the international marketing manager's task complex?
Q6) Identify and briefly describe the six most commonly used promotional strategies.
Page 17
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Chapter 16: Global Operations and Supply Chain Management
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Sample Questions
Q1) When designing production facilities, designers generally find that:
A) automated machinery is severely limited in flexibility regarding product variety and sizes.
B) general-purpose machines require skills that are built into a special-purpose machine.
C) they have to choose between low-output specialized machinery and higher-output, general-purpose machines.
D) all of the above
E) two of A, B, and C
Q2) Problems associated with e-procurement include:
A) it cannot be isolated from the company's overall business system.
B) it must be completed before the firm can engage in other purchasing functions, such as supplier determination and analysis.
C) it can expose the company to a wide range of potential security issues.
D) all of the above.
E) two of A, B, and C.
Q3) Why is the design of products and services important to global supply chain management, and what are the main design alternatives that are available?
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Chapter 17: Managing Human Resources in an International Context
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Q1) Failure rates for expatriate assignments have been reported to range from 25 to 45 percent.
A)True
B)False
Q2) According to the text, the failure rate for expatriate assignments, including failing to achieve performance targets for an international assignment or prematurely returning from the assignment, ranges from _______ percent.
A) 6 to 10
B) 15 to 25
C) 25 to 45
D) 30 to 55
E) 41 to 65
Q3) For expatriate employees, the salary portion of the compensation package is:
A) usually higher than that for employees at the same level in the home company.
B) usually lower than that for employees at the same level in the home company.
C) usually within the range of that for the employees at the same level in the home company.
D) usually on a separate, expatriate schedule.
E) none of the above.
19
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Chapter 18: International Accounting and Financial Management
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Q1) For the conservative international firm, there is no reason to move money other than the repatriation of profits.
A)True
B)False
Q2) The OECD and the U.S. Internal Revenue Service have issued guidelines on transfer pricing because it has such critical tax implications.
A)True
B)False
Q3) Compared to equity financing, debt financing is thought to be:
A) less expensive, because interest on the debt is usually tax deductible.
B) more expensive, because interest rates are beyond the control of the company.
C) more expensive, because debt markets are professionally run and mostly institutional.
D) less expensive, because the debt is usually aggregated.
Q4) American depository receipts are held by a bank in the stock's home country and these receipts then are traded on the U.S. exchange.
A)True
B)False
Page 20
Q5) Discuss the risks associated with transaction exposure and how to hedge them.
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