Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Based on the text, it should be obvious that markets are__________ in reality,
and consequently, monopolistic advantages _________ be exploited.
a. | perfect; may possibly | c. | imperfect; may possibly | b. | perfect;
cannot | d. | imperfect;
cannot |
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2.
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If countries are highly influential upon each other, the correlations of their
economic growth levels would likely be __________. A firm would benefit __________ by diversifying
sales among these countries relative to another set of countries that were not influential upon each
other.
a. | high and positive; more | c. | high and positive;
less | b. | close to zero; more | d. | close to zero; less |
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3.
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Which of the following is a reason to consider international business?
a. | economies of scale. | c. | diversification. | b. | exploit monopolistic
advantages. | d. | all of the
above |
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4.
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Assume a U.S. firm initiates direct foreign investment in the U.K.. If the
British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to
the parent should _______. The parent may request that the subsidiary _______ in order to benefit
from the expectation about the pound.
a. | increase; postpone remitting earnings until the pound strengthens | b. | decrease; postpone
remitting earnings until the pound strengthens | c. | decrease; remit earnings immediately before the
pound strengthens | d. | increase; remit earnings immediately before the
pound strengthens |
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5.
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A country with high unemployment could best increase its employment by:
a. | encouraging foreign firms to establish subsidiaries that produce the same products
local firms produce. | b. | encouraging foreign firms to establish
licensing arrangements for products local firms produce. | c. | encouraging foreign
firms to establish subsidiaries that produce products local firms do not produce. | d. | none of the above
would reduce employment. |
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6.
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Which of the following is not true regarding host government attitudes towards
foreign direct investment (FDI)?
a. | Host governments may offer incentives to MNCs in the form of subsidies in certain
circumstances. | b. | Host governments generally perceive FDI as a remedy to eliminate a country's
political problems. | c. | The ability of a host government to attract FDI
is dependent on the country's markets and resources. | d. | Some types of FDI
will be more attractive to some governments than to others. | e. | All of the above are
true. |
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7.
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When a firm perceives that a foreign currency is _________, the firm may attempt
direct foreign investment in that country, as the initial outlay should be relatively _______.
a. | overvalued; high | c. | undervalued; high | b. | overvalued; low | d. | undervalued;
low |
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8.
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To enter markets where superior profits are possible, an MNC should:
a. | acquire a competitor that has controlled its local market. | b. | establish a
subsidiary or acquire a competitor in a new market. | c. | establish a subsidiary in a market where
tougher trade restrictions will adversely affect the firm's export volume. | d. | establish
subsidiaries in markets whose business cycles differ from those where existing subsidiaries are
based. |
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9.
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When economic conditions of two countries are ________, then a firm would
_______ its risk by operating in both countries instead of concentrating just in one.
a. | highly correlated; reduce | c. | not highly correlated;
reduce | b. | not highly correlated; not reduce | d. | none of the
above |
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True/False
Indicate whether the
statement is true or false.
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10.
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Most of the FDI by UK firms is in the US.
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11.
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They key to international diversification is selecting foreign projects whose
performance levels are highly correlated over time.
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12.
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MNCs commonly consider direct foreign investment because it can improve their
profitability and enhance shareholder wealth.
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