Name: 
 

Chapter 1


Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 
The commonly accepted goal of the MNC is to:
a.
maximize short-term earnings.
b.
maximize shareholder wealth.
c.
minimize risk.
d.
A and C.
e.
maximize international sales.
 

 2. 
Which of the following is not a form of corporate control that could reduce agency problems for an MNC?
a.
stock options.
b.
hostile takeover threat.
c.
investor monitoring.
d.
all of the above are forms of corporate control that could reduce agency problems for an MNC.
 

 3. 
Which of the following theories suggests that firms seek to penetrate new markets over time?
a.
theory of comparative advantage.
c.
product cycle theory.
b.
imperfect markets theory.
d.
none of the above
 

 4. 
Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.
a.
true.
b.
false.
 

 5. 
According to the text, products and services are generally becoming _______ standardized across countries, which tends to _______ the globalization of business.
a.
more; encourage
c.
less; discourage
b.
more; discourage
d.
less; encourage
 

 6. 
The Single European Act of 1987:
a.
reduced competition in most industries.
b.
eliminated competition in many industries.
c.
reduced efficiency in most industries.
d.
increased competition in most industries.
 

 7. 
_____________ are most commonly classified as a direct foreign investment.
a.
Foreign acquisitions
c.
Licensing agreements
b.
Purchases of international stocks
d.
Exporting transactions
 

 8. 
Which of the following is not mentioned in the text as a constraint interfering with the MNC goal?
a.
economic constraints.
c.
regulatory constraints.
b.
environmental constraints.
d.
ethical constraints.
 

 9. 
Which of the following is not a way in which agency problems can be reduced through corporate control?
a.
executive compensation.
c.
acquisition of a foreign subsidiary.
b.
threat of hostile takeover.
d.
monitoring by large shareholders.
 

 10. 
Due to the larger opportunity set of funding sources around the world from which an MNC can choose, an MNC may be able to obtain capital at a lower cost than a purely domestic firm.
a.
true.
b.
false.
 

 11. 
One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency problems.
a.
true.
b.
false.
 

 12. 
A centralized management style for an MNC results in relatively high agency costs.
a.
true.
b.
false.
 



 
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