International Business

International Business, 8e (Griffin/Pustay)
Chapter 1 An Overview of International Business
1) Which of the following could be considered a major reason that a city would want to host the
Olympic Games?
A) to prevent the economic growth of competing nations
B) the long-term benefits of tourism
C) to test the capacity of national infrastructure
D) to promote international harmony
Answer: B
Diff: 2
Skill: Concept
Objective: 3
2) Which of the following would be considered an international business transaction?

A) purchasing products in one country and assembling them in the same country
B) recruiting employees internationally
C) borrowing money from a major bank to finance capital improvements
D) shipping finished products from one country to another for retail sale
Answer: D
Diff: 2
Skill: Concept
Objective: 1
Learning Outcome: Define the fundamental concepts of international business
3) The Internet has helped small businesses compete in global markets because it ________.
A) allows them to establish a physical presence in each country
B) avoids transactions involving foreign exchange
C) eliminates price controls
D) reduces entry costs
Answer: D
Diff: 2
AACSB: Information Technology
Skill: Concept
Objective: 2
4) According to the CAGE Model, which of the following refers to the physical,
communications, and transportation links between countries?
A) cultural distance
B) administrative distance
C) geographic distance
D) economic distance
Answer: C
Diff: 2
Skill: Concept
Objective: 2
5) Individuals should most likely study international business to ________.

A) comply with graduate school certification requirements
B) ensure that an employer has a global online presence
C) remain current on the latest business methods
D) obtain bilingual business experience
Answer: C
Diff: 2
Skill: Concept
Objective: 2
6) Which of the following has most likely triggered the increase of small businesses involved in
international business?
A) e-commerce
B) economic recession
C) foreign-made materials
D) increased cultural literacy
Answer: A
Diff: 2
Skill: Concept
Objective: 2
Learning Outcome: Discuss trends in and the debate over globalization
7) Just-in-time systems were created in ________.

A) the United States
B) Japan
C) Germany
D) China
Answer: B
Diff: 1
Skill: Concept
Objective: 2
8) Just-in-time systems are used by firms to ________.

A) store important data
B) manage inventory
C) monitor production
D) screen job applicants
Answer: B
Diff: 2
Skill: Concept
Objective: 2
9) Sony's suppliers deliver necessary inputs as they are needed by Sony. Sony is most likely
using a(n) ________ system.
A) cross-functional
B) just-in-time
C) inventory management
D) on-demand delivery
Answer: B
Diff: 1
Skill: Application
Objective: 2
10) Black and Decker produces tools at a plant in North Carolina and ships the tools to retailers
in England. This is an example of which type of international business activity?
A) merchandising
B) importing
C) exporting
D) trading
Answer: C
Diff: 2
Skill: Application
Objective: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
11) ________ is the buying of products made in other countries for use or resale in one's own
country.
A) Exporting
B) Importing
C) Merchandising
D) Transporting
Answer: B
Diff: 1
Skill: Concept
Objective: 3
business
12) Sam's Club purchases kalamata olives from Greece for sale in its stores. Which international
business activity does this represent?
A) exporting
B) importing
C) merchandising
D) franchising
Answer: B
Diff: 2
Skill: Application
Objective: 3
business
13) The British term for the trading of tangible goods is ________.
A) visible trade
B) invisible trade
C) merchandising
D) service franchising
Answer: A
Diff: 1
Skill: Concept
Objective: 3
business
14) The British term for the trading of intangible goods is ________.
A) visible trade
B) invisible trade
C) merchandise exports and imports
D) service exports and imports
Answer: B
Diff: 1
Skill: Concept
Objective: 3
business
15) Boeing, an American firm, sells commercial aircraft to Lufthansa in Germany. This is an
example of ________.
A) exporting
B) importing
C) licensing
D) franchising
Answer: A
Diff: 2
Skill: Application
Objective: 3
business
16) Exports account for about ________ of Netherland's gross domestic product?
A) 20%
B) 35%
C) 50%
D) 75 %
Answer: D
Diff: 2
Skill: Concept
Objective: 3
business
17) The international business activity called ________ occurs when capital is supplied by
residents of one country to residents of another country.
A) international investment
B) global direct investment
C) portfolio financing
D) state capitalism
Answer: A
Diff: 2
Skill: Concept
Objective: 3
18) ________ are investments made for the purpose of actively controlling property, assets, or
companies located in host countries.
A) Licensing investments
B) Portfolio investments
C) Foreign direct investments
D) Indirect global investments
Answer: C
Diff: 1
Skill: Concept
Objective: 3
19) Which term refers to the location of a parent company's headquarters?

A) host country
B) home country
C) third country
D) local country
Answer: B
Diff: 1
Skill: Concept
Objective: 3
20) If a company is headquartered in Taiwan, then Taiwan is the company's ________.

A) host country
B) home country
C) dominant country
D) competitive country
Answer: B
Diff: 1
Skill: Application
Objective: 3
21) Ford Motor Company is based in Detroit, Michigan. It also has offices in Germany, England,
and China. Which of the following is Ford's home country?
A) Germany
B) England
C) China
D) United States
Answer: D
Diff: 2
Skill: Application
Objective: 3
22) The ________ is where a company operates but is not headquartered.

A) host country
B) home country
C) parental country
D) third party country
Answer: A
Diff: 1
Skill: Concept
Objective: 3
23) Siemens is headquartered in Germany but maintains operations in the United States. The
United States is the ________ country.
A) home
B) host
C) parent
D) subsidiary
Answer: B
Diff: 2
Skill: Application
Objective: 3
24) Trade between nations can be traced back as far as ________.

A) 2000 BC
B) 500 BC
C) 1200
D) 1600
Answer: A
Diff: 2
Skill: Concept
Objective: 1
25) Which country was a significant focal point for international business during the Middle
Ages?
A) China
B) England
C) Italy
D) Russia
Answer: C
Diff: 2
Skill: Concept
Objective: 1
26) ________ are purchases of foreign financial assets for a purpose other than control.
A) Foreign direct investments
B) Global business investments
C) Foreign portfolio investments
D) Indirect investments
Answer: C
Diff: 1
Skill: Concept
Objective: 3
27) If a Dutch pension fund purchases 1,000 shares of Sony's stock, the Dutch company has most
likely ________.
A) made a foreign direct investment
B) made a foreign portfolio investment
C) earned a higher return on assets
D) earned a lower rate of return
Answer: B
Diff: 2
Skill: Application
Objective: 3
28) Compared to Thailand, the United Kingdom has a ________ level of exports of goods and
services as a percentage of GDP.
A) slightly lower
B) slightly higher
C) significantly lower
D) significantly higher
Answer: C
Diff: 3
Skill: Concept
Objective: 3
29) Kraft purchased all of the common stock of Cadbury PLC. This is an example of ________.
A) foreign portfolio investment
B) foreign direct investment
C) international expansion
D) global licensing
Answer: B
Diff: 2
Skill: Application
Objective: 3
30) McDonald's has licensed its brand name, operational systems, and trademarks to individual
restaurant owners in Europe. This is called international ________.
A) leasing
B) marketing
C) franchising
D) diversifying
Answer: C
Diff: 2
Skill: Application
Objective: 3
31) ________ is a contractual arrangement in which a firm in one country allows the use of its
intellectual property by a firm in a second country in return for a royalty payment.
A) Leasing
B) Franchising
C) Licensing
D) Merchandising
Answer: C
Diff: 1
Skill: Concept
Objective: 3
32) Licensing usually involves permission to use which of the following?

A) real estate
B) trademarks
C) labor leasing
D) production facilities
Answer: B
Diff: 2
Skill: Concept
Objective: 3
33) Walt Disney permits a German clothing manufacturer to market children's pajamas
embroidered with Mickey Mouse in return for a percentage of company sales. This is an example
of ________.
A) franchising
B) licensing
C) leasing
D) piracy
Answer: B
Diff: 2
Skill: Application
Objective: 3
34) A(n) ________ involves a firm in one country agreeing to operate facilities for a firm in
another country for an agreed fee.
A) franchising agreement
B) licensing agreement
C) management contract
D) indirect investment
Answer: C
Diff: 2
Skill: Concept
Objective: 3
35) Any organization that engages in cross-border commercial transactions with individuals,
private firms, and/or public sector organizations is a(n) ________.
A) multinational corporation
B) multinational enterprise
C) international business
D) international franchise
Answer: C
Diff: 1
Skill: Concept
Objective: 3
36) The term ________ is used to identify firms that have extensive involvement in international
business.
A) global operation
B) multinational corporation
C) international conglomerate
D) multidomestic organization
Answer: B
Diff: 1
Skill: Concept
Objective: 3
37) The International Red Cross is an example of a(n) ________.

A) international business
B) multinational enterprise
C) multinational organization
D) multinational corporation
Answer: C
Diff: 1
Skill: Concept
Objective: 3
38) Which of the following is a common activity of MNCs?

A) training of international managers
B) buying resources in various countries
C) inventing goods in a variety of countries
D) establishing foreign exchange rates
Answer: B
Diff: 2
Skill: Concept
Objective: 3
39) Toyota, ExxonMobil, General Electric, and Volkswagen are all examples of ________.
A) multinational corporations
B) management contracts
C) portfolio investments
D) franchised firms
Answer: A
Diff: 2
Skill: Concept
Objective: 3
40) International nonprofit organizations are called ________.

A) multinational corporations
B) multinational organizations
C) multinational enterprises
D) multinational nonprofits
Answer: B
Diff: 2
Skill: Concept
Objective: 3
41) The integration of markets, nation-states, and technologies in a way that is enabling
individuals, corporations, and nation-states to reach around the world farther, faster, deeper, and
cheaper than ever before is referred to as ________.
A) international business organization
B) market internationalization
C) economic integration
D) globalization
Answer: D
Diff: 1
Skill: Concept
Objective: 4
42) The ratio of international trade to economic activity has ________ since 1950.
A) risen slightly
B) risen dramatically
C) fallen slightly
D) remained about the same
Answer: B
Diff: 2
Skill: Concept
Objective: 4
43) The importance of foreign direct investment in the world's economy has ________ over time.
A) fallen slightly
B) fallen significantly
C) risen significantly
D) risen slightly
Answer: C
Diff: 2
Skill: Concept
Objective: 4
44) Which of the following is the most likely reason that firms globalize?
A) boredom with existing markets
B) the divesting of low-cost resources
C) leveraging core competencies
D) competing for public prestige
Answer: C
Diff: 2
Skill: Concept
Objective: 4
45) A ________ is a distinctive strength that is central to a firm's operations.

A) core competency
B) unilateral skill
C) comparable advantage
D) strategic imperative
Answer: A
Diff: 1
Skill: Concept
Objective: 4
46) Which of the following is a primary reason that firms acquire resources and supplies from
other countries?
A) comply with trade regulations
B) minimize resource competition
C) decrease shipping and handling costs
D) obtain items unavailable in home country
Answer: D
Diff: 2
Skill: Concept
Objective: 4
47) Which of the following is a likely reason that firms globalize?
A) avoid strategic stagnation
B) achieve economies of scale
C) concentrate the firm's revenue stream
D) increase dependence on home country sales
Answer: B
Diff: 3
Skill: Concept
Objective: 4
48) Pepsi's reason for following Coca-Cola to new markets was most likely to ________.
A) acquire resources and supplies
B) leverage core competencies
C) compete more effectively
D) gain economies of scale
Answer: C
Diff: 3
Skill: Concept
Objective: 4
49) After World War I, international business was primarily restricted by ________.
A) import barriers
B) export restrictions
C) government contracts
D) high transportation costs
Answer: A
Diff: 2
Skill: Concept
Objective: 4
50) After World War II, international business was primarily triggered by the ________.
A) loss of high-quality Japanese goods
B) reduction of tariffs and quotas
C) improvement of transportation
D) introduction of the Euro
Answer: B
Diff: 2
Skill: Concept
Objective: 4
51) Mexico and Poland are examples of ________.
A) Second World economies
B) emerging markets
C) First World economies
D) developed markets
Answer: B
Diff: 2
Skill: Concept
Objective: 5
52) Which of the following is considered a BRIC nation?

A) Britain
B) Russia
C) Indonesia
D) Chile
Answer: B
Diff: 1
Skill: Concept
Objective: 3
53) By 500 B.C.E., ________ merchants were exporting silk and jade to India and parts of
Europe.
A) American
B) Chinese
C) Japanese
D) Greek
Answer: B
Diff: 2
Skill: Concept
Objective: 3
54) What is the primary reason that U.S. advertising agencies frequently film commercials in
South Africa?
A) environmental safeguards
B) improved competition
C) low production costs
D) new markets
Answer: C
Diff: 2
Skill: Concept
Objective: 4
55) Regional trade and investment has been made easier through which of the following?
A) the Global Trade Institute
B) Kyoto Protocol
C) the Hanover Accord
D) North American Free Trade Agreement
Answer: D
Diff: 2
Skill: Concept
Objective: 4
56) Which of the following is not considered a dominant institution in the Era of Globalization?
A) World Trade Organization
B) International Olympic Committee
C) World Bank
D) International Monetary Fund
Answer: B
Diff: 2
Skill: Concept
Objective: 3
57) During the Cold War, which term was used when referring to the Soviet Union and its allied
Communist states?
A) First World
B) Second World
C) Third World
D) Fourth World
Answer: B
Diff: 2
Skill: Concept
Objective: 5
58) During the Cold War, which term was used when referring to the United States, Australia,
and Western Europe?
A) First World
B) Second World
C) Third World
D) Fourth World
Answer: A
Diff: 2
Skill: Concept
Objective: 5
59) During the Cold War, low-income countries in ________ were primarily considered
suppliers of raw materials to First World countries.
B) Western Europe
C) the Soviet Union
D) Latin America
Answer: D
Diff: 1
Skill: Concept
Objective: 5
60) Which two countries account for more than one-third of the world's population?
A) Mexico and Brazil
B) China and India
C) Brazil and India
D) Mexico and China
Answer: B
Diff: 2
Skill: Concept
Objective: 5
61) Capital supplied by residents of one country to residents of another is known as ________.
A) international investments
B) host-country financing
C) international franchising
D) domestic inversion financing
Answer: A
Diff: 2
Skill: Concept
Objective: 2
62) Which of the following is a primary source of revenue for the IOC during the Olympics?
A) television coverage
B) public donations
C) real estate sales
D) international loans
Answer: A
Diff: 1
Skill: Concept
Objective: 1
63) A boundaryless economy is one in which ________.
A) exported goods are predominant
B) regional borders are significant
C) trade laws are strictly enforced
D) national borders are irrelevant
Answer: D
Diff: 2
Skill: Concept
Objective: 1
64) International business originally consisted of ________.

A) FDI
B) international trade
C) licensing
D) contract manufacturing
Answer: B
Diff: 1
Skill: Concept
Objective: 2
Chapter 2 Global Marketplaces and Business Centers
1) One likely consequence of the diminishing Arctic ice cap is ________.

A) less war
B) more affordable utility rates for lesser-developed nations
C) an increase in regional tourism
D) the creation of the Northwest Passage
Answer: D
Diff: 1
Skill: Concept
Objective: 1
2) Which of the following is a member of the Arctic Council?

A) France
B) Singapore
C) Finland
D) Mexico
Answer: C
Diff: 1
Skill: Concept
Objective: 1
3) Approximately ________ of the world's current economic activity is concentrated in North

America, the EU, and Japan.
A) 24%
B) 46%
C) 57%
D) 72%
Answer: C
Diff: 2
Skill: Concept
Objective: 1
4) Under the United Nations Convention on the Laws of the Sea, countries are given control over
navigation within ________ of the coastline.
A) one mile
B) five miles
C) twelve miles
D) twenty miles
Answer: C
Diff: 2
Skill: Concept
Objective: 1
5) Companies doing international business are more likely to be successful when they ________.
A) conduct frequent performance appraisals
B) understand local market characteristics
C) employ primarily local managers
D) rely on experienced expatriates
Answer: B
Diff: 2
Skill: Concept
Objective: 1
6) What is London's origin as a world financial center?

A) military power of the British Empire in the nineteenth century
B) influence of royalty on the city's reputation
C) rule over several former American colonies
D) prestige of the London Stock Exchange
Answer: A
Diff: 2
Skill: Concept
Objective: 1
7) Which of the following markets has the GREATEST impact on the world's current economic
activity?
A) United States
B) European Union
C) China
D) Japan
Answer: A
Diff: 1
Skill: Concept
Objective: 1
8) In the twenty-first century, growth rates in ________ have outpaced those in ________.
A) the United States and China; India and Japan
B) Canada and Japan; Germany and the U.S.
C) Japan and India; China and Canada
D) China and India; Germany and Japan
Answer: D
Diff: 3
Skill: Concept
Objective: 1
9) The European Union accounted for about ________ in GDP in 2011.
A) 6 trillion dollars
B) 17 trillion dollars
C) 35 trillion dollars
D) 79 trillion
Answer: B
Diff: 2
Skill: Concept
Objective: 4
10) Which country has the highest per capita income in North America?
B) Central America
C) Canada
D) Mexico
Answer: A
Diff: 1
Skill: Concept
Objective: 2
11) The countries of North America produce approximately ________ percent of the world's
output.
A) 18
B) 26
C) 45
D) 52
Answer: B
Diff: 2
Skill: Concept
Objective: 2
12) ________ is the currency in which the sale of goods and services is denominated.
A) Flight capital
B) Euro currency
C) Invoicing currency
D) Capital substitution
Answer: C
Diff: 1
Skill: Concept
Objective: 2
13) The prime market for lower-income countries that are trying to raise their living standards
through exports is ________.
B) Japan
C) Germany
D) China
Answer: A
Diff: 2
Skill: Concept
Objective: 2
14) ________ is the money sent out of a politically or economically unstable country to one
perceived as a safe haven.
A) Invoicing currency
B) Flight capital
C) Capital substitution
D) Foreign currency
Answer: B
Diff: 1
Skill: Concept
Objective: 2
15) When a firm makes a sale of goods denominated in Japanese yen, the yen is referred to as
________.
A) flight capital
B) export capital
C) the invoicing currency
D) the transaction currency
Answer: C
Diff: 2
Skill: Concept
Objective: 2
16) Which country listed below commonly attracts flight capital?

A) Germany
B) Canada
C) the United States
D) Singapore
Answer: C
Diff: 1
Skill: Concept
Objective: 2
17) U.S. exports of goods and services in 2012 accounted for about ________ percent of U.S.
GDP.
A) 14
B) 23
C) 30
D) 45
Answer: A
Diff: 3
Skill: Concept
Objective: 2
18) About what percentage of the world's 500 largest corporations in 2010 were headquartered in
the United States?
A) 12%
B) 19%
C) 27%
D) 45%
Answer: C
Diff: 2
Skill: Concept
Objective: 3
19) Which of the following is true of Mexico?

A) It is the world's third-largest Spanish-speaking nation.
B) It has increased its protectionist measures in recent years.
C) It has been promoting the privatization of multiple industries.
D) It has refused to sign free trade pacts with El Salvador, Guatemala, and Honduras.
Answer: C
Diff: 3
AACSB: Dynamics of the global economy
Skill: Concept
Objective: 3
Learning Outcome: Describe how differences in political economy influence economic
development
20) ________ is the dominant market for Canadian goods.

A) The European Union
B) The United States
C) China
D) Mexico
Answer: B
Diff: 1
Skill: Concept
Objective: 3
21) Which of the following aspects about Canada is a concern to many international investors?
A) legal system instability
B) separatist movement
C) weak infrastructure
D) education system
Answer: B
Diff: 3
Skill: Concept
Objective: 3
development
22) As of 2013, how many countries participate in the European Union's common currency, the
euro?
A) 12
B) 17
C) 22
D) 27
Answer: B
Diff: 1
Skill: Concept
Objective: 4
23) Countries designated "middle income" have per capita incomes of ________.
A) less than $995
B) between $1,025 and $12,476
C) between $12,477 and $23,221
D) between $23,222 and $34,021
Answer: B
Diff: 2
Skill: Concept
Objective: 2
24) The European Union is comprised of ________ countries.

A) 12
B) 15
C) 22
D) 28
Answer: D
Diff: 1
Skill: Concept
Objective: 4
25) Which country is an undeveloped nation?
A) Cambodia
B) Costa Rica
C) India
D) Somalia
Answer: A
Diff: 2
Skill: Concept
Objective: 6
26) What is the most likely reason that Germany is considered the most important member of the
EU?
A) Germany has the world's fourth largest economy.
B) Germany's government promotes human rights.
C) Germany initially suggested developing the EU.
D) Germany uses a codetermination system.
Answer: A
Diff: 3
Skill: Concept
Objective: 4
27) Which EU country has drawn criticism for promoting an agenda of economic nationalism,
and in particular, for protecting its farmers under the guise of the Common Agricultural Policy?
A) Germany
B) France
C) Italy
D) Spain
Answer: B
Diff: 2
Skill: Concept
Objective: 4
development
28) Who was responsible for introducing glasnost and perestroika to the Soviet Union?
A) Czar Nicholas II
B) Boris Yeltsin
C) Vladimir Putin
D) Mikhail Gorbachev
Answer: D
Diff: 2
Skill: Concept
Objective: 4
development
29) Which of these countries is not a member of the EU?
A) Austria
B) Monaco
C) Norway
D) Portugal
Answer: C
Diff: 1
Skill: Concept
Objective: 4
30) What country holds the world's largest land mass?

B) Russia
C) China
D) Canada
Answer: B
Diff: 2
Skill: Concept
Objective: 4
31) Who was Russia's first democratically elected president?

A) Mikhail Baryshnikov
B) Mikhail Gorbachev
C) Boris Yeltsin
D) Vladimir Putin
Answer: C
Diff: 1
Skill: Concept
Objective: 4
32) The Newly Independent States refers to the ________.

A) Central European countries
B) former Soviet republics
C) largest African nations
D) Four Tigers
Answer: B
Diff: 1
Skill: Concept
Objective: 4
33) Which of the following has achieved high-income status according to the World Bank?
A) the Czech Republic
B) Mexico
C) Chile
D) Turkey
Answer: A
Diff: 2
Skill: Concept
Objective: 4
34) Russia's major natural resources include which of the following?

A) aluminum
B) natural gas
C) vermiculite
D) grain
Answer: B
Diff: 2
Skill: Concept
Objective: 4
35) Immediately following World War II, Japan's Ministry for International Trade and
Investment encouraged firms to concentrate on ________.
A) steel and shipbuilding
B) automobiles and electronics
C) financial services
D) apparel and footwear
Answer: A
Diff: 2
Skill: Concept
Objective: 5
36) The Japanese term sogo shosha refers to a(n) ________.

A) major Japanese bank
B) family of interrelated companies
C) export trading company
D) supplier
Answer: C
Diff: 2
Skill: Concept
Objective: 5
37) The Japanese term, keiretsu, refers to a(n) ________.
A) major Japanese bank
B) family of interrelated companies
C) export trading company
D) supplier
Answer: B
Diff: 2
Skill: Concept
Objective: 5
38) Samsung, Hyundai, Daewoo Group, and LG are all examples of ________.
A) chaebol
B) keiretsu
C) glasnost
D) sogo shosha
Answer: A
Diff: 2
Skill: Concept
Objective: 5
39) Which of the following is most likely a true statement about New Zealand?
A) The country prohibits privatization in most industries.
B) Most of the country's population lives on the South Island.
C) The country primarily relies on its gold and coal resources.
D) Merchandise trade is extremely important to the country's GDP.
Answer: D
Diff: 3
Skill: Concept
Objective: 5
development
40) All of the following except ________ are typical exports from New Zealand.
A) dairy products
B) computer technology
C) kitchen appliances
D) petroleum
Answer: A
Diff: 2
Skill: Concept
Objective: 5
41) The Four Tigers are also called ________.
A) newly industrialized countries
B) newly independent states
C) commonwealth of independent states
D) commonwealth of industrialized countries
Answer: A
Diff: 2
Skill: Concept
Objective: 5
42) Which of the countries listed below is considered one of the Four Tigers?
A) North Korea
B) Indonesia
C) Taiwan
D) China
Answer: C
Diff: 1
Skill: Concept
Objective: 5
43) The World Bank classifies the Four Tigers as ________.

A) developing
B) middle-income
C) newly developed
D) high-income
Answer: D
Diff: 2
Skill: Concept
Objective: 5
44) What caused South Korea's economic growth to suddenly slow in 1997-1998?
A) collapse of the chaebol
B) return to Communist rule
C) Asian currency crisis
D) import substitution policies
Answer: C
Diff: 2
Skill: Concept
Objective: 5
45) The Korean term, chaebol, refers to ________.
A) a family-based conglomerate
B) workplace harmony
C) economic restructuring
D) cooperative banks
Answer: A
Diff: 1
Skill: Concept
Objective: 5
46) Which of the following African countries is not a major oil exporter?
A) Algeria
B) Gabon
C) Zambia
D) Libya
Answer: C
Diff: 1
Skill: Concept
Objective: 6
47) The Republic of China is most commonly known as ________.

A) Taiwan
B) Vietnam
C) Hong Kong
D) Singapore
Answer: A
Diff: 1
Skill: Concept
Objective: 5
48) What is the most likely reason that Taiwanese businesses are increasingly investing in
Chinese factories?
A) demand for automated manufacturing
B) need for low-wage workers
C) government requirements
D) need for additional land
Answer: B
Diff: 2
Skill: Concept
Objective: 5
49) What is the most significant problem for Singapore today?
A) Chinese control
B) shipping costs
C) labor shortages
D) low technological expertise
Answer: C
Diff: 2
Skill: Concept
Objective: 5
50) Because of its excellent port facilities, Singapore thrives on ________.

A) shipping
B) oil refining
C) franchising
D) reexporting
Answer: D
Diff: 2
Skill: Concept
Objective: 5
51) ________ is the world's most populous country.

A) India
B) China
C) Indonesia
D) The United States
Answer: B
Diff: 1
Skill: Concept
Objective: 5
52) India was a colony of which country?

A) China
B) France
C) Pakistan
D) the United Kingdom
Answer: D
Diff: 1
Skill: Concept
Objective: 5
53) Which two countries make up the Indian subcontinent?
A) India and Egypt
B) India and Pakistan
C) Afghanistan and India
D) India and Iran
Answer: B
Diff: 1
Skill: Concept
Objective: 5
54) Which of the following is not a similarity between India and Great Britain?
A) parliamentary system
B) dependent judiciary
C) an amateur bureaucracy
D) state-owned industry
Answer: A
Diff: 2
Skill: Concept
Objective: 6
55) Alfred Communications, a U.S. firm, is considering opening a facility in India. However,
executives at the firm are not certain that India is the best location for investment. What is the
most likely reason for management's concerns?
A) weak judiciary system
B) rampant corruption
C) state capitalism
D) religious strife
Answer: B
Diff: 3
Skill: Application
Objective: 5
development
56) Thailand, Malaysia, and Indonesia were all recipients of significant FDI during the 1980s
and 1990s because they offer ________.
A) strong domestic currencies
B) large domestic markets
C) few trade barriers
D) low labor costs
Answer: D
Diff: 2
Skill: Concept
Objective: 5
57) Because of its past colonial relationship, France has a competitive advantage in which of the
countries listed below?
A) Botswana
B) Chad
C) Kenya
D) the Republic of South Africa
Answer: B
Diff: 2
Skill: Concept
Objective: 6
Learning Outcome: Explain how differences in culture affect the international business
environment
58) Because of its past colonial relationship, the United Kingdom has a competitive advantage in
which of the countries listed below?
A) Somalia
B) Gabon
C) Senegal
D) the Republic of South Africa
Answer: D
Diff: 2
Skill: Concept
Objective: 6
environment
59) What region is sometimes called the cradle of civilization?

A) the European Union
B) the Middle East
C) the Far East
D) Africa
Answer: B
Diff: 2
Skill: Concept
Objective: 6
60) Which of the following religions was not born in the Middle East?
A) Buddhism
B) Christianity
C) Judaism
D) Islam
Answer: A
Diff: 2
Skill: Concept
Objective: 6
environment
61) A policy that attempts to stimulate development of local industry by discouraging imports
through tariffs and nontariff barriers is called ________.
A) export substitution
B) import substitution
C) development stimulation
D) protectionism
Answer: B
Diff: 2
Skill: Concept
Objective: 1
development
62) A policy that encourages economic growth through export expansion is called ________.
A) export expansion
B) export substitution
C) export promotion
D) development stimulation
Answer: C
Diff: 2
Skill: Concept
Objective: 1
development
63) Export promotion has been successfully applied by which of the countries listed below?
A) Taiwan
B) Cuba
C) Argentina
D) Brazil
Answer: A
Diff: 2
Skill: Concept
Objective: 6
64) Which of the following best explains why Japan's economic growth has slowed?
A) state industries
B) import restrictions
C) poor quality control
D) fast-growing population
Answer: B
Diff: 2
Skill: Concept
Objective: 5
development
65) ITX Enterprises, an electronics firm, plans to open a new manufacturing facility. Managers
are considering building the new plant in Canada. Which of the following is a risk associated
with a Canadian expansion?
A) unstable federal and state governments
B) inadequate secondary education systems
C) political instability related to language conflicts
D) shrinking supply of natural resources for exporting
Answer: C
Diff: 2
Skill: Application
Objective: 3
66) Parker Manufacturing is considering relocating its headquarters from its current location in
Vancouver, British Columbia. Executives at Parker want the firm to be located with the majority
of other MNCs in the world. Which location would be most appropriate?
A) Zurich
B) Boston
C) Tokyo
D) London
Answer: B
Diff: 2
Skill: Application
Objective: 3
67) Brampton Industries has a facility in a country that has been designated by the World Bank
as middle-income. Which of the following is the most likely location of Brampton's plant?
A) Costa Rica
B) Turkey
C) Latvia
D) Rwanda
Answer: A
Diff: 1
Skill: Application
Objective: 3
68) The world's most populous Spanish-speaking nation is ________.

A) Spain
B) Brazil
C) Mexico
D) China
Answer: C
Diff: 2
Skill: Application
Objective: 3
69) Hawthorne Enterprises, an Australian firm, has plans to open a manufacturing facility in
France next year. Some executives at the firm are unhappy with this decision, most likely
because France ________.
A) opposes human rights legislation
B) promotes economic nationalism
C) refuses to switch to the euro
D) advocates free trade
Answer: B
Diff: 2
Skill: Application
Objective: 4
Learning Outcome: Discuss arguments for and against government intervention in international
business
70) A small to medium, family-owned enterprise, often located in a small German town is city is
known as ________.
A) keiretsu
B) perestroika
C) glasnost
D) mittelstand
Answer: D
Diff: 1
Skill: Concept
Objective: 4
71) Executives at Oswego Enterprises, a U.S. textile company, are discussing the idea of
expanding into the Asian market by opening a facility in Hong Kong. Which of the following is a
characteristic of Hong Kong?
A) complete autonomy from China
B) entry point to mainland China
C) location of few major banks
D) low labor rates for a poorly educated workforce
Answer: B
Diff: 2
Skill: Application
Objective: 5
business
72) Executives at Cornwall Industries, a U.S. firm, are considering expanding into Niger. As a
manager at the firm you have been given the task of analyzing the advantages and disadvantages
of Niger. Which of the following is the most likely problem associated with expanding into
Niger?
A) influence of British government
B) insufficient natural resources
C) dominance of French firms
D) risk of civil unrest
Answer: C
Diff: 2
Skill: Application
Objective: 6
business
Chapter 3 Legal, Technological, Accounting, and Political Environments
1) Statutory law is primarily based on ________.

A) legislative actions
B) historic precedents
C) moral judgments
D) religious beliefs
Answer: A
Diff: 2
Skill: Concept
Objective: 1
2) Common law is primarily based on ________.

A) actions taken by government legislatures
B) the cumulative wisdom of judges' decisions on individual cases through history
C) a codification of what is and is not permissible
D) the officially established rules governing the faith and practice of a particular religion
Answer: B
Diff: 2
Skill: Concept
Objective: 1
3) Civil law is primarily based on ________.

A) actions taken by local governments
B) the cumulative wisdom of judges' decisions on individual cases through history
C) a codification of what is and is not permissible
D) the officially established rules governing the faith and practice of a particular religion
Answer: C
Diff: 2
Skill: Concept
Objective: 1
4) Religious law is primarily based on ________.

A) legislative actions
B) judges' court decisions
C) codifications of permissible acts
D) officially established rules governing a faith
Answer: D
Diff: 2
Skill: Concept
Objective: 1
5) Walton Enterprises, a U.S. firm, has a facility in China. Walton managers in China frequently
complain about the arbitrary rules and decisions implemented by Chinese government
authorities. Such legal unpredictability suggests that China has a system based on ________ law.
A) civil
B) common
C) theocratic
D) bureaucratic
Answer: D
Diff: 2
Skill: Application
Objective: 1
6) Which of the following is a foundation for legal systems?

A) common law
B) the principles of comity
C) administrative law
D) regulatory law
Answer: A
Diff: 3
Skill: Concept
Objective: 1
7) ________ is the foundation of the legal systems in the United Kingdom and its former
colonies.
A) Common law
B) Civil law
C) Religious law
D) Bureaucratic law
Answer: A
Diff: 2
Skill: Concept
Objective: 1
8) ________ is based on the cumulative wisdom of judges' decisions on individual cases through
history.
A) Common law
B) Civil law
C) Statutory law
D) Bureaucratic law
Answer: A
Diff: 2
Skill: Concept
Objective: 1
9) The foundation of the legal system in India is ________.
A) common law
B) civil law
C) religious law
D) bureaucratic law
Answer: A
Diff: 2
Skill: Concept
Objective: 1
10) The foundation of the legal system in China is ________.

A) common law
B) civil law
C) religious law
D) bureaucratic law
Answer: D
Diff: 2
Skill: Concept
Objective: 1
11) ________ is based on a codification of what is and is not permissible.

A) Common law
B) Civil law
C) Statutory law
D) Religious law
Answer: B
Diff: 2
Skill: Concept
Objective: 1
12) ________ is law enacted by legislative action.

A) Common law
B) Civil law
C) Statutory law
D) Bureaucratic law
Answer: C
Diff: 1
Skill: Concept
Objective: 1
13) The U.S. Freedom of Information Act is an example of ________.
A) common law
B) civil law
C) statutory law
D) bureaucratic law
Answer: C
Diff: 2
Skill: Concept
Objective: 1
14) Civil law originated in biblical times with the ________.

A) French
B) Greeks
C) Jews
D) Romans
Answer: D
Diff: 1
Skill: Concept
Objective: 1
15) Dawson Enterprises, a U.S. firm, conducts business in Saudi Arabia. The MNE recently
experienced a business dispute with a local firm and was forced to meet the demands of the local
firm without going through due process. Dawson's experience most likely occurred because
Saudi Arabia relies on ________.
A) civil law
B) common law
C) religious law
D) bureaucratic law
Answer: C
Diff: 2
Skill: Application
Objective: 1
16) In which of the following countries are interest-bearing transactions not allowed?
A) India
B) South Korea
C) Iran
D) Mexico
Answer: C
Diff: 2
Skill: Concept
Objective: 1
17) A legal system that lacks due process, lacks appeals procedures, and prohibits banks from
charging interest on loans is most likely based on ________.
A) common law
B) civil law
C) religious law
D) bureaucratic law
Answer: C
Diff: 1
Skill: Concept
Objective: 1
18) In Iran, the religious law is based on the teachings of the ________.
A) Bible
B) Koran
C) Buddha
D) Napoleonic Code
Answer: B
Diff: 1
Skill: Concept
Objective: 1
19) Under which type of legal system can contracts be broken at the whim of those in power?
A) religious law
B) common law
C) bureaucratic law
D) civil law
Answer: C
Diff: 2
Skill: Concept
Objective: 1
20) ________ operates under bureaucratic law.

A) England
B) Mexico
C) Iran
D) China
Answer: D
Diff: 2
Skill: Concept
Objective: 1
21) Of the laws that may form the basis for a country's legal system, which one is considered the
riskiest for international businesses?
A) common law
B) religious law
C) bureaucratic law
D) statutory law
Answer: C
Diff: 2
Skill: Concept
Objective: 1
environment
22) One country in which a lack of the rule of law appears to be affecting FDI is ________.
A) Russia
B) Canada
C) Singapore
D) New Zealand
Answer: A
Diff: 2
Skill: Concept
Objective: 2
23) Laws regarding ________ are the primary reason the manufacturers in Germany and France
compete on quality rather than price.
A) interest rates
B) worker safety
C) patent liability
D) employee benefits
Answer: D
Diff: 2
Skill: Concept
Objective: 2
development
24) A country restricting access to high-technology goods or withdrawing preferential tariff

treatments is using ________.
A) embargoes
B) trade limits
C) sanctions
D) extraterritoriality
Answer: C
Diff: 2
Skill: Concept
Objective: 2
25) Which of the following is not a sanction?
A) boycotts
B) embargoes
C) high-interest loans
D) removal of preferential tariffs
Answer: C
Diff: 2
Skill: Concept
Objective: 2
26) The United States restricts all trade with Cuba. This is an example of a(n) ________.
A) boycott
B) tariff
C) embargo
D) ban
Answer: C
Diff: 1
Skill: Application
Objective: 2
27) Dual-use products are those that can be used for both ________ and ________ purposes.
A) civilian; military
B) domestic; business
C) wholesale; retail
D) profit; nonprofit
Answer: A
Diff: 1
Skill: Concept
Objective: 2
28) Many countries enforced embargoes against ________ during the 1980s to protest its
apartheid policies.
A) Cuba
B) South Africa
C) China
D) Afghanistan
Answer: B
Diff: 1
Skill: Concept
Objective: 2
29) A country that attempts to regulate business activities that are conducted outside its borders
is using ________.
A) extraterritoriality
B) embargoes
C) sanctions
D) boycotts
Answer: A
Diff: 2
Skill: Concept
Objective: 2
30) The ________ is directed against international firms that traffic in the assets of U.S.
companies that were confiscated by the Cuban government in 1959.
A) Bay of Pigs Declaration
B) Anti-Castro Act
C) Helms-Burton Act
D) Freeport McMoRan Doctrine
Answer: C
Diff: 1
Skill: Concept
Objective: 2
31) Extraterritoriality refers to ________.

A) the transfer of ownership of resources from the private to the public sector
B) a government's attempt to regulate business activities outside its borders
C) nationalization of a corporation without fair and appropriate compensation
D) restrictions on the ability of a company to return profits to its headquarters
Answer: B
Diff: 2
Skill: Concept
Objective: 2
32) ________ refers to the transfer of ownership of resources from the private to the public
sector.
A) Nationalization
B) Expropriation
C) Federalization
D) Conversion
Answer: A
Diff: 1
Skill: Concept
Objective: 2
33) Expropriation is best defined as the ________.
A) transference of ownership of resources from private to public sector with no compensation
B) transference of ownership from private to public sector with compensation to private owners
for their losses
C) conversion of state-owned property to privately owned property
D) conversion of state-owned property to privately owned property with no compensation
Answer: B
Diff: 2
Skill: Concept
Objective: 2
34) Privatization is ________.

A) the transfer of ownership of resources from the public to the private sector
B) a government's regulation of business activities outside its borders
C) nationalization without compensation
D) nationalization with compensation
Answer: A
Diff: 2
Skill: Concept
Objective: 2
35) Privatization frequently creates opportunities for international businesses because most state-
owned entities are ________.
A) untaxed
B) well funded
C) unprofitable
D) well staffed
Answer: C
Diff: 2
Skill: Concept
Objective: 2
business
36) In which industry does Mexico restrict foreign ownership?

A) energy
B) broadcasting
C) transportation
D) telecommunications
Answer: A
Diff: 3
Skill: Concept
Objective: 2
business
37) Which of the following best explains why the telecommunications industry has been
privatized in many countries?
A) shrinking ability to employ quality workers
B) international regulations regarding social media
C) citizen demands to separate government and business
D) inability of governments to pay for technological upgrades
Answer: D
Diff: 3
Skill: Concept
Objective: 2
business
38) Randall's Groceries, an international supermarket chain, recently opened a new store in the
Taiwanese market. Which of the following will Taiwanese consumers most likely experience?
A) a decrease in the selection of products
B) more mom-and-pop stores
C) higher standards of quality
D) the loss of local jobs
Answer: C
Diff: 3
Skill: Application
Objective: 2
Learning Outcome: Explain the implications of foreign direct investment for both host and home
country
39) Hawkins Tire is an international chain of discount tire stores. The firm has recently opened a
store in Frankfurt, Germany, where there are already a number of local tire stores. Which of the
following is the most likely negative effect of Hawkins Tire on Frankfurt?
A) failure of local tire stores
B) higher prices for tires
C) lower tire selection
D) poor tire quality
Answer: A
Diff: 3
Skill: Application
Objective: 2
country
40) The ________ provides that a country will honor and enforce within its own territory the
judgments and decisions of foreign courts with certain limitations.
A) Helms-Burton Act
B) principle of comity
C) arbitration agreement
D) principle of fairness
Answer: B
Diff: 1
Skill: Concept
Objective: 3
41) Which of the following questions is most relevant when resolving an international business
dispute?
A) Which country's law applies?
B) Is the defendant financially solvent?
C) How long should litigation occur?
D) Where does the plaintiff prefer to file the dispute?
Answer: A
Diff: 2
Skill: Concept
Objective: 3
42) Which of the following is not one of the conditions required for the principle of comity to
apply?
A) Reciprocity is extended between the countries.
B) The defendant is given improper notice.
C) The foreign court judgment violates domestic statutes or treaty obligations.
D) The foreign court has less stringent punitive damages for corporations.
Answer: A
Diff: 2
Skill: Concept
Objective: 3
43) When a company seeks to have a dispute heard in the court system most favorable to its own
interests, the company is ________.
A) forum shopping
B) adopting the principle of comity
C) rejecting the principle of comity
D) engaging in arbitration
Answer: A
Diff: 1
Skill: Concept
Objective: 3
44) ________ is the process by which both parties in a conflict agree to submit their cases to a
private individual or body whose decision they will honor.
A) Negotiation
B) Repatriation
C) Arbitration
D) Resolution
Answer: C
Diff: 1
Skill: Concept
Objective: 3
45) ________ provides that the actions of foreign governments against U.S. firms are generally
beyond the jurisdiction of U.S. courts.
A) Arbitration
B) The Helms-Burton Act
C) The principle of comity
D) The Foreign Sovereign Immunities Act of 1976
Answer: D
Diff: 1
Skill: Concept
Objective: 3
46) What was the key to the transition from communism to capitalism for Hungary and Poland?
A) technology transfer from FDI
B) investment in infrastructure
C) the adoption of the euro
D) low-cost labor forces
Answer: A
Diff: 1
Skill: Concept
Objective: 3
47) In which country are monetary awards in legal disputes usually the highest?
A) United States
B) France
C) United Kingdom
D) Canada
Answer: A
Diff: 1
Skill: Concept
Objective: 3
48) Which of the following would most likely help a country change its technological
environment?
A) more government regulations
B) greater government spending
C) minimum wage increase
D) foreign direct investment
Answer: D
Diff: 2
Skill: Concept
Objective: 4
49) The transmittal of technology from one country to another is known as technology
________.
A) repatriation
B) transfer
C) drain
D) piracy
Answer: B
Diff: 1
Skill: Concept
Objective: 4
50) Which country has the highest rate of software piracy?

A) China
B) Azerbaijan
C) Pakistan
D) Bangladesh
Answer: A
Diff: 2
Skill: Concept
Objective: 4
51) The United States frequently has patent flooding disputes with ________.
A) China
B) Japan
C) Germany
D) Hong Kong
Answer: B
Diff: 2
Skill: Concept
Objective: 2
52) In which country do firms publish a social balance sheet detailing their treatment and
compensation of their workforce?
A) France
B) Germany
C) the United Kingdom
D) China
Answer: A
Diff: 2
Skill: Concept
Objective: 5
53) Which law was passed to address perceived public accounting problems?
A) Burton-Helms Act
B) Sarbanes-Oxley Act
C) Berne Convention
D) Hays-Douglas Act
Answer: B
Diff: 2
Skill: Concept
Objective: 5
54) Accounting reserves ________.

A) are the basis for assessing a firm's income tax burden
B) record deductions and expenses that are relevant for taxes
C) are important in determining how inventory should be valued
D) record foreseeable future expenses that might affect a firm's operations
Answer: D
Diff: 2
Skill: Concept
Objective: 5
55) ________ is a systematic analysis of the political risks possible in foreign countries.
A) Environmental scanning
B) SWOT analysis
C) Political risk assessment
D) Operating risk analysis
Answer: C
Diff: 1
Skill: Concept
Objective: 6
56) Which results in a loss of assets?
A) repatriation
B) confiscation
C) expropriation
D) inflation
Answer: B
Diff: 1
Skill: Concept
Objective: 6
57) ________ is the risk associated with the potential for the firm's property to be confiscated or
expropriated.
A) Transfer risk
B) Ownership risk
C) Operating risk
D) Exchange rate risk
Answer: B
Diff: 1
Skill: Concept
Objective: 6
58) ________ is the risk associated with the potential for the employees or operations of the firm
to be threatened by changes in laws, environmental standards, tax codes, and terrorism.
A) Transfer risk
B) Ownership risk
C) Operating risk
Answer: C
Diff: 1
Skill: Concept
Objective: 6
59) ________ is the risk associated with the potential for the government to interfere with the
firm's ability to move funds in and out of the country.
A) Transfer risk
B) Ownership risk
C) Operating risk
Answer: A
Diff: 1
Skill: Concept
Objective: 6
60) Wilfred Enterprises has foreign operations in Taiwan, India, and China. The firm pays an
annual insurance premium to the Overseas Private Investment Corporation. The firm is most
likely protecting itself from ________.
A) privatization
B) natural disasters
C) nationalization
D) financial instability
Answer: C
Diff: 2
Skill: Application
Objective: 6
61) Political risk that affects all firms in a country is referred to as ________.
A) micropolitical risk
B) macropolitical risk
C) inclusive political risk
D) exclusive political risk
Answer: B
Diff: 1
Skill: Concept
Objective: 6
62) ________ is political risk that affects only a specific firm or firms within a specific industry.
A) Inclusive political risk
B) Exclusive political risk
C) Micropolitical risk
D) Macropolitical risk
Answer: C
Diff: 1
Skill: Concept
Objective: 6
63) ________ has one of the highest levels of macropolitical risk.

A) Saudi Arabia
B) Chile
C) Venezuela
D) Afghanistan
Answer: D
Diff: 2
Skill: Concept
Objective: 6
64) The Unites States limits foreigners to ________ ownership of U.S. television and radio
stations.
A) 25%
B) 49%
C) 67%
D) 99%
Answer: A
Diff: 2
Skill: Concept
Objective: 2
65) Saudi Arabia's nationalization of the oil industry in the 1970s is an example of ________.
A) macropolitical risk
B) micropolitical risk
C) transfer risk
D) ownership risk
Answer: B
Diff: 2
Skill: Concept
Objective: 6
66) Martin, a manager at an international firm located in China, is required to monitor political
risks for his employer. Which of the following would least likely provide Martin with useful
information?
A) consulting firms
B) embassy officials
C) telecommunication firms
D) home country employees
Answer: C
Diff: 2
Skill: Application
Objective: 6
67) BGL Enterprises, a global firm, operates a facility in Angola. Managers want to reduce the
firm's vulnerability to political risk in Angola. All of the following actions would most likely
accomplish this task except ________.
A) reducing net investment in the subsidiary
B) purchasing capital equipment outright
C) buying inputs from local suppliers
D) being a good corporate citizen
Answer: B
Diff: 3
Skill: Application
Objective: 6
68) APO Manufacturing is a U.S. based firm that manufactures electronic equipment. The firm
conducts business with a Japanese electronics firm, and a dispute has arisen between the two
firms regarding intellectual property rights. APO management plans to use arbitration to resolve
the problem. Which of the following best supports this decision?
A) APO's legal department is knowledgeable in global patent laws.
B) APO's legal department expects the principle of comity to apply.
C) APO needs to settle the dispute quickly and inexpensively.
D) APO expects to have record profits during the next year.
Answer: C
Diff: 3
AACSB: Reflective Thinking
Skill: Critical Thinking
Objective: 3
69) The IT department at World Airlines has recently improved the airlines' Website to help
facilitate transactions. Now, when repeat customers log on to the Website, their seating
preferences and billing addresses are automatically accessed. For World Airlines customers
located in the European Union, the company will most likely have to ________.
A) obtain customer permission before using cookies
B) register the domain name of all clients
C) block all pop-ups on the Website
D) provide a secure Web portal
Answer: A
Diff: 2
Skill: Application
Objective: 2
70) Pimlico Steel operates an aluminum refining plant in Jamaica. The contract between Pimlico
and Jamaica requires the corporation to train Jamaican engineers in the latest processes. Jamaica
has most likely required Pimlico to agree to a(n) ________.
A) intellectual property contract
B) electronic copyright system
C) technology transfer
D) direct investment
Answer: C
Diff: 2
Skill: Application
Objective: 4
country
71) Ellis Electronics is a U.S. firm with operations in Saudi Arabia. Ellis has learned that it may
face expropriation. What would be the most likely result of such actions?
A) higher operating costs
B) loss of future profits
C) higher security costs
D) loss of assets
Answer: B
Diff: 2
Skill: Application
Objective: 6
Chapter 4 The Role of Culture
1) Which term refers to the collection of values, beliefs, behaviors, customs, and attitudes that
distinguish one society from another?
A) history
B) culture
C) politics
D) norms
Answer: B
Diff: 1
Skill: Concept
Objective: 1
2) In which country is nepotism valued?

B) Great Britain
C) France
D) China
Answer: D
Diff: 2
Skill: Concept
Objective: 2
3) Which virtue of a job candidate would most likely be perceived as valuable by a Japanese
employer?
A) unity
B) a competitive nature
C) individualism
D) quantifiable material goals
Answer: A
Diff: 2
AACSB: Multicultural and diversity understanding
Skill: Application
Objective: 2
environment
4) From what source do cultural changes usually occur?

A) internal forces
B) external forces
C) strengths
D) weaknesses
Answer: B
Diff: 2
Skill: Concept
Objective: 2
5) Social structure is best defined as the ________.

A) means by which a society's members communicate with each other
B) attitudes of MNEs towards corporate social responsibility on a global scale
C) overall framework that determines the roles of individuals within a society
D) behavior of and opportunities available to MNCs operating in a given society
Answer: C
Diff: 2
Skill: Concept
Objective: 2
6) Which of the following is not a component of social structure?

A) individual roles
B) stratification of society
C) individual mobility within society
D) societal dress codes within regions
Answer: D
Diff: 2
Skill: Concept
Objective: 2
7) Which form of family is most emphasized in the United States?

A) nuclear
B) extended
C) blended
D) ancestral
Answer: A
Diff: 2
Skill: Concept
Objective: 2
8) Which form of family is most emphasized in Somalia?

A) nuclear
B) extended
C) blended
D) ancestral
Answer: D
Diff: 3
Skill: Concept
Objective: 2
9) Businesses in ________ discourage nepotism while in ________ family ties are crucial to
ensure the growth of a company.
A) the U.S.; China
B) China; Germany
C) Saudi Arabia; the United Kingdom
D) France; the United States
Answer: A
Diff: 2
Skill: Concept
Objective: 2
environment
10) Which country listed below is a group-focused society?

A) Japan
B) Germany
C) Ireland
D) Canada
Answer: A
Diff: 1
Skill: Concept
Objective: 2
11) In which of the following countries is social mobility likely to be highest?

B) India
D) Hong Kong
Answer: A
Diff: 2
Skill: Concept
Objective: 2
12) Social stratification refers to how people in a society are ________.

A) sorted for housing
B) identified by families
C) paid for employment
D) categorized by attributes
Answer: D
Diff: 2
Skill: Concept
Objective: 2
13) ________ is the ability of individuals to move from one stratum of society to another.
A) Social stratification
B) Social mobility
C) Socialization
D) Hierarchical structure
Answer: B
Diff: 1
Skill: Concept
Objective: 2
14) The ________ the society, the more possible it is for individuals to move from one stratum to
another.
A) less stratified
B) more stratified
C) more populated
D) less populated
Answer: A
Diff: 2
Skill: Concept
Objective: 2
15) Which country listed below is considered socially immobile?

A) U.S.
B) India
C) Canada
D) Singapore
Answer: B
Diff: 2
Skill: Concept
Objective: 2
16) Historically, the rigid class system and low social mobility in the United Kingdom has led to
________.
A) fewer young people seeking higher education
B) more elderly people dependent on families
C) less foreign investment in manufacturing
D) more tailored advertisements in the media
Answer: A
Diff: 2
Skill: Concept
Objective: 2
17) Religion ________.
A) is the exclusive means by which a society's members communicate with each other
B) shapes the attitudes its adherents have toward work, consumption, individual responsibility,
and planning for the future
C) is the overall framework that determines the roles of individuals within a society, the
stratification of the society, and the individuals' mobility within the society
D) stems from deep-seated beliefs about the individual's position in relation to his or her deity,
the family, and social hierarchy
Answer: B
Diff: 2
Skill: Concept
Objective: 3
18) Countries with multiple language groups tend to be ________.

A) homogeneous
B) heterogeneous
C) large
D) small
Answer: B
Diff: 2
Skill: Concept
Objective: 3
19) The third major source of motion pictures is ________.

A) Nollywood
B) Dollywood
C) Bollywood
D) Hollywood
Answer: A
Diff: 2
Skill: Concept
Objective: 1
20) Quadro Tires is an MNE with facilities in Australia, Ireland, Canada, and the U.S. Which of
the following is the least likely problem that Quadro experiences in global management?
A) political risks
B) cultural differences
C) language complications
D) supply chain variations
Answer: C
Diff: 2
Skill: Application
Objective: 3
environment
21) Lingua franca means ________.
A) common language
B) French language
C) official language
D) Latin language
Answer: A
Diff: 1
Skill: Concept
Objective: 3
22) ________ is the lingua franca of international business.

A) French
B) Spanish
C) English
D) American
Answer: C
Diff: 1
Skill: Concept
Objective: 3
23) Before finalizing a new advertisement for the Chinese market, Barton Soda assigns one
person to translate the advertisement from English to Chinese and another person to translate the
translated version back into English. Barton is most likely using ________.
A) translation
B) backtranslation
C) proofreading
D) market pre-testing
Answer: B
Diff: 2
Skill: Application
Objective: 3
environment
24) The primary purpose of conducting a backtranslation is to ________.

A) convey a positive image
B) meet FAA requirements
C) avoid communication mistakes
D) ensure global media functionality
Answer: C
Diff: 2
Skill: Concept
Objective: 3
25) While negotiating a contract between an American firm and a Japanese supplier, the
Japanese manager responds by saying "yes." The Japanese manager probably meant ________.
A) yes, I agree
B) no, that's wrong
C) yes, I understand
D) I will think about it
Answer: C
Diff: 2
Skill: Application
Objective: 3
environment
26) Communication senders and receivers from different cultures use ________ to encode or
decode the message.
A) perceptions
B) cultural filters
C) written tools
D) media
Answer: B
Diff: 1
Skill: Concept
Objective: 3
27) What percentage of information is transmitted among members of a culture by some means
other than language?
A) 20-30 percent
B) 40-50 percent
C) 60-70 percent
D) 80-90 percent
Answer: D
Diff: 1
Skill: Concept
Objective: 3
28) During a business meeting with Japanese executives, Jay, an American manager, uses his
hand to make the "okay" signal. The Japanese executives will most likely interpret Jay's hand
signal to mean ________.
A) okay
B) a vulgarity
C) money
D) homosexuality
Answer: C
Diff: 2
Skill: Application
Objective: 3
environment
29) Mario, a U.S. manager, is attending a business meeting with Saudi Arabian executives.
During conversations, Mario should most likely expect that the Saudi Arabian executives will
stand ________ from him.
A) 10 inches
B) 20 inches
C) 30 inches
D) 40 inches
Answer: A
Diff: 2
Skill: Application
Objective: 3
environment
30) Brandon, a U.S. manager, is on a business trip in Tokyo meeting with a group of executives.
Brandon receives a gift from one of the Japanese executives. What should Brandon most likely
do?
A) verify the gift's cost
B) open the gift in private
C) refuse to accept the gift
D) open the gift in front of the group
Answer: B
Diff: 2
Skill: Application
Objective: 3
environment
31) Bad news in Korea should be delivered ________.
A) right away
B) in private
C) at the end of the day
D) when another person opens a gift
Answer: C
Diff: 3
Skill: Concept
Objective: 3
32) The rise of capitalism has been attributed by Max Weber to ________.
A) the Protestant ethic
B) consumption desires
C) democracy
D) economic hardships
Answer: A
Diff: 2
Skill: Concept
Objective: 4
33) The Protestant ethic stresses which of the following?

A) hard work
B) exuberance
C) material accomplishments
D) consumption
Answer: A
Diff: 2
Skill: Concept
Objective: 4
34) According to the text, ________ of the world's population claims a religious affiliation.
A) 94%
B) 84%
C) 74%
D) 64%
Answer: B
Diff: 2
Skill: Concept
Objective: 4
35) Hinduism stresses which of the following?
A) short-term thinking
B) frugality
C) materialism
D) consumption
Answer: B
Diff: 2
Skill: Concept
Objective: 4
36) According to the text, the second most popular religion in the world behind Christianity is
________.
A) Islam
B) Judaism
C) Hinduism
D) Buddhism
Answer: A
Diff: 2
Skill: Concept
Objective: 4
37) Tristan is attending a business meeting in Saudi Arabia. How often during the day should
Tristan expect his host to stop the meeting to pray to Allah each day?
A) 2 times
B) 3 times
C) 4 times
D) 5 times
Answer: D
Diff: 2
Skill: Application
Objective: 4
environment
38) In which country does the attitude "time is money" prevail?

A) Japan
B) Saudi Arabia
C) Canada
D) Mexico
E) Argentina
Answer: C
Diff: 2
Skill: Concept
Objective: 4
39) Cultural attitudes ________.
A) are the means by which a society's members communicate with each other
B) are the overall framework that determines the roles of individuals within a society
C) shape the behavior of and opportunities available to international businesses operating in a
given culture
D) stem from deep-seated beliefs about the individual's position in relation to his or her deity
Answer: C
Diff: 2
Skill: Concept
Objective: 4
40) In ________, it is acceptable to interrupt meetings to greet family or friends who wander by.
A) the U.S.
B) Canada
C) England
D) Arab cultures
Answer: D
Diff: 1
Skill: Concept
Objective: 4
environment
41) In India, a person's status depends on ________.

A) age
B) corporate affiliation
C) caste
D) personal achievement
Answer: C
Diff: 1
Skill: Concept
Objective: 4
42) In a ________ culture, a speaker's words explicitly convey the speaker's message.
A) verbal
B) low-context
C) high-context
D) linguistic
Answer: B
Diff: 2
Skill: Concept
Objective: 3
43) Which of the following countries is considered a high-context culture?
A) Canada
B) Germany
C) China
D) England
Answer: C
Diff: 2
Skill: Concept
Objective: 3
44) Which of the following is a negotiating style common among Japanese managers?
A) being argumentative
B) making subtle power plays
C) exhibiting emotional passion
D) making spontaneous decisions
Answer: B
Diff: 2
Skill: Concept
Objective: 3
environment
45) In a high-context culture, the presence of a lawyer during business dealing would be
considered a sign of ________.
A) wisdom
B) trust
C) distrust
D) pragmatism
E) commitment
Answer: C
Diff: 2
Skill: Concept
Objective: 3
environment
46) A ________ comprises countries that share many cultural similarities.

A) value cluster
B) cultural cluster
C) trading bloc
D) region
Answer: B
Diff: 1
Skill: Concept
Objective: 5
47) What is a greenfield investment?
A) a brand-new investment
B) a corporate shift toward a "greener" strategy
C) a joint venture with a firm that is recognized as a "green" company
D) an overall shift in attitude towards less waste and more foreign investment
Answer: A
Diff: 2
Skill: Concept
Objective: 5
48) Which of the following is considered to be relatively individualistic?

A) United States
B) China
C) Singapore
D) Mexico
Answer: A
Diff: 2
Skill: Concept
Objective: 6
49) Which of the following is a characteristic of the Latin American negotiating style?
A) impatience with documentation
B) hiding of emotions
C) drawn-out decision making
D) a lack of loyalty to employer
Answer: A
Diff: 2
Skill: Concept
Objective: 4
50) Which of the following is one of Hofstede's Five Dimensions?

A) scope orientation
B) cultural orientation
C) time orientation
D) knowledge orientation
Answer: C
Diff: 2
Skill: Concept
Objective: 6
51) ________ is a person's beliefs about the relative importance of the individual and the groups
to which that person belongs.
A) Social orientation
B) Time orientation
C) Uncertainty orientation
D) Goal orientation
Answer: A
Diff: 1
Skill: Concept
Objective: 6
52) ________ is the cultural belief that the person comes first.
A) Social orientation
B) Individualism
C) Uncertainty orientation
D) Goal orientation
Answer: B
Diff: 1
Skill: Concept
Objective: 6
53) According to Hofstede's Five Dimensions, ________ is the opposite of individualism.

A) wa
B) groupism
C) collectivism
D) goal orientation
Answer: C
Diff: 1
Skill: Concept
Objective: 6
54) Which of the following countries is considered a collectivist culture?

A) Singapore
B) New Zealand
C) United States
D) Canada
Answer: A
Diff: 2
Skill: Concept
Objective: 6
55) Cultures emphasizing collectivism are more likely to emphasize ________.
A) self-interest
B) self-actualization
C) nepotism
D) higher education
Answer: C
Diff: 2
Skill: Concept
Objective: 6
56) In Japan, a collectivist society, a CEO's pay primarily reflects ________.

A) knowledge
B) group performance
C) personal accomplishments
D) individual contributions to the firm
Answer: B
Diff: 2
Skill: Concept
Objective: 6
environment
57) In a collectivist society, changing jobs is most likely interpreted as ________.

A) wisdom
B) disloyalty
C) impatience
D) ambition
Answer: B
Diff: 2
Skill: Concept
Objective: 6
environment
58) In which country would an employee most likely question the decision of a manager?
A) Spain
B) Japan
C) Germany
D) Singapore
Answer: C
Diff: 2
Skill: Concept
Objective: 6
environment
59) In cultures characterized by ________, people at all levels in a firm accept the decision of
those above them because of the implicit belief that higher-level positions carry the right to make
decisions.
A) power respect
B) power tolerance
C) uncertainty avoidance
D) passive goal behavior
Answer: A
Diff: 1
Skill: Concept
Objective: 6
60) ________ is the feeling people have regarding ambiguous situations.

A) Power orientation
B) Locus of control
C) Optimism
D) Uncertainty orientation
Answer: D
Diff: 1
Skill: Concept
Objective: 6
61) Formal rules, structure and routine in the workplace are preferred by individuals from a
culture high in ________.
A) power tolerance
B) power respect
C) uncertainty avoidance
D) uncertainty acceptance
Answer: C
Diff: 2
Skill: Concept
Objective: 6
environment
62) ________ refers to the extent to which members of a culture adopt a long-term versus a
short-term outlook on work, life, and other aspects of society.
A) Need for achievement
B) Time orientation
C) Power orientation
D) Uncertainty orientation
Answer: B
Diff: 1
Skill: Concept
Objective: 6
63) ________ is the unconscious use of one's own culture to help assess new surroundings.
A) Cultural conversion
B) Cultural illiteracy
C) Cross-cultural literacy
D) Self-reference criterion
E) Acculturation
Answer: D
Diff: 1
Skill: Concept
Objective: 7
64) What is the first step in acculturation?

A) cultural conversion
B) cross-cultural literacy
C) self-reference criterion
D) language training
Answer: B
Diff: 2
Skill: Concept
Objective: 7
65) ________ is the process by which people not only understand a foreign culture but also
modify and adapt their behavior to make it compatible with that culture.
A) Cultural conversion
B) Cross-cultural literacy
C) Culture training
D) Acculturation
Answer: D
Diff: 1
Skill: Concept
Objective: 7
66) Why did the producers of the The Apprentice have problems selling the Japanese version of
the show to Japanese TV networks?
A) Public humiliation is avoided in the Japanese culture.
B) Japanese networks were offended by the show's language.
C) Backtranslation tools were unavailable to the Japanese producers.
D) The Japanese political system supports the concept of lifetime employment.
Answer: A
Diff: 2
Skill: Concept
Objective: 2
environment
67) Country X has 14 official languages and nearly 2,000 dialects. Which of the following is
most likely a true statement?
A) Nonverbal communication is unlikely to be very effective in Country X.
B) Income and value differences exist among the citizens of Country X.
C) MNEs should avoid Country X due to costly adaptation needs.
D) Nationhood is the defining factor of the society in Country X.
Answer: B
Diff: 3
Skill: Application
Objective: 2
environment
68) According to the low-context-high-context theory, in which of the following countries

should advertisements be fact-oriented?
A) Japan
B) Greece
C) Saudi Arabia
D) Germany
Answer: D
Diff: 2
Skill: Application
Objective: 5
environment
69) According to the low-context-high-context theory, business decisions made by ________

managers are more likely to be impulsive.
A) American
B) Mexican
C) Japanese
D) German
Answer: B
Diff: 2
Skill: Concept
Objective: 5
environment
70) U.S. firms' first exporting efforts often focus on ________.
A) Canada
B) Norway
C) Denmark
D) Mexico
Answer: A
Diff: 2
Skill: Concept
Objective: 2
Chapter 5 Ethics and Social Responsibility in International Business
1) Which term refers to an individual's personal beliefs about whether a decision, behavior, or
action is right or wrong?
A) values
B) culture
C) ethics
D) norms
Answer: C
Diff: 1
Skill: Concept
Objective: 1
2) Ethical beliefs are primarily ________ in nature.

A) societal
B) familial
C) individual
D) cultural
Answer: C
Diff: 2
AACSB: Ethical understanding and reasoning abilities
Skill: Concept
Objective: 1
3) Which of the following is most influential on an individual's ethics?

A) occupation
B) peers
C) social trends
D) television
Answer: B
Diff: 1
Skill: Concept
Objective: 1
4) Behavior that fails to conform to generally accepted social norms is considered ________.
A) ethical
B) unethical
C) illegal
D) unregulated
Answer: B
Diff: 1
Skill: Concept
Objective: 1
5) When behavior conforms to generally accepted norms, it is referred to as ________ behavior.
A) ethical
B) societal
C) normal
D) unethical
Answer: A
Diff: 1
Skill: Concept
Objective: 1
6) ________ are the things a person feels to be important.

A) Values
B) Ethics
C) Norms
D) Expectations
Answer: A
Diff: 1
Skill: Concept
Objective: 1
7) Which of the following best explains why looting was uncommon in Japan after the country's
2011 earthquake and tsunami?
A) personal religious beliefs
B) individual desires for survival
C) pressures from law enforcement
D) importance of group membership
Answer: D
Diff: 3
Skill: Concept
Objective: 1
8) Mick has been padding his expense account on business trips. However, it seems fair to him
because the company refuses to provide him with comp time despite long hours he works on
these business trips. Which ethical generalization does this most likely illustrate?
A) Individuals have their own personal belief system.
B) Individuals are typically consistent with their beliefs.
C) Individuals can rationalize behavior in various circumstances.
D) Individuals from the same cultural contexts have similar beliefs.
Answer: C
Diff: 3
Skill: Application
Objective: 1
9) Three employees of Martin Enterprises have flown to China to meet a potential business
partner. The three employees cannot agree about giving a gift to the potential partner. James, an
American manager, believes that gift-giving is an ethical violation. Eun Hee, a South Korean
manager, and Evan Lee, a Japanese manager, assert that gift-giving would be appropriate. This
situation most likely illustrates which of the following statements?
A) Personal and business ethics are often rationalized.
B) Gift exchanges are a more important way of doing business in high-context cultures
C) Belonging to a group is important to the Asian culture.
D) Individuals may not always be consistent with their beliefs.
Answer: B
Diff: 3
Skill: Concept
Objective: 2
10) Sonya and Amber work together in the Hong Kong corporate office. Despite having similar
backgrounds and education, they cannot agree on whether it is appropriate to offer bribes to
Chinese officials for the purpose of expediting business transactions. Which ethical
generalization does this most likely illustrate?
A) Individuals have their personal belief systems.
B) Culture has the strongest influence on personal ethics.
C) Personal values rarely overlap with global business dealings.
D) Society requires individuals to rationalize ethical inconsistencies.
Answer: A
Diff: 3
Skill: Application
Objective: 1
Learning Outcome: Discuss the role of ethics and social responsibility in international business.
11) BP's program to prepare managers at headquarters for assignments in Russia is an example
of ________.
A) ethics training
B) selection procedures
C) corporate socialization
D) employee orientation
Answer: A
Diff: 1
Skill: Concept
Objective: 2
12) Which of the following is most susceptible to ethical variations in international business?
A) advertising
B) working conditions
C) insurance benefits
D) employee skills
Answer: B
Diff: 2
Skill: Concept
Objective: 2
13) Which term refers to a decision that benefits an individual to the possible detriment of the
organization?
A) conflict of interest
B) confidentiality
C) ethical behavior
D) breach of privacy
Answer: A
Diff: 1
Skill: Concept
Objective: 2
14) Braxton Clothing Company most likely forbids its buyers from accepting gifts from potential
suppliers because the firm wants to avoid a(n) ________.
B) strategic breakdown
C) breach of contract
D) trade violation
Answer: A
Diff: 2
Skill: Application
Objective: 2
15) Gift exchanges in a business situation in Japan are best described as ________.
A) common
B) trendy
C) rare
D) illegal
Answer: A
Diff: 1
Skill: Concept
Objective: 2
environment
16) Gift exchanges are likely to be considered a conflict of interest in a(n) ________ culture.
A) high-context
B) collectivist
C) low-context
D) power-respecting
Answer: C
Diff: 2
Skill: Concept
Objective: 2
environment
17) HR at APEX Designs, an international architectural firm noticed the following behaviors
among employees lately. Which of the following would most likely be considered a problematic
ethical situation at APEX?
A) bringing office supplies from home
B) making business calls during work time
C) padding company expense accounts
D) working overtime
Answer: C
Diff: 1
Skill: Application
Objective: 2
18) Jack always likes to place orders with Sam's Supply Company because the company sends
him a gift certificate for $100 each holiday season. Which ethical issue is this an example of?
B) honesty
C) confidentiality
D) secrecy
Answer: A
Diff: 1
Skill: Application
Objective: 2
19) Which of the following is a common method for encouraging ethical behavior among
employees?
A) codes of ethics
B) promoting religion in the workplace
C) public admonishment
D) highlighting the failures of competitive companies
Answer: A
Diff: 1
Skill: Concept
Objective: 3
20) Which of the following most likely improves the effectiveness of a code of ethics for an
MNE?
A) relevancy to local religions
B) application by new recruits
C) explanation through online training
D) support from organizational practices
Answer: D
Diff: 2
Skill: Concept
Objective: 3
21) Morton Enterprises manufactures electronic components used in automobiles. The firm is
currently based in the U.S. but is planning to expand operations overseas. Morton's new
manufacturing facilities in China and Bangladesh are scheduled to open in six months. HR and
top executives are working together to revise the firm's code of ethics. Ten of Morton's American
managers will be relocated overseas for at least three years to manage international operations
alongside locally hired managers. Which of the following questions is most relevant to the
current discussion about the firm's code of ethics?
A) Should the code of ethics be globally consistent or tailored to local contexts?
B) What should be addressed by the firm's code of ethics in order to comply with U.S. laws?
C) Should home-country or host-country managers provide training on the firm's code of ethics?
D) What punishment is used by the firm's competitors when employees violate the code of
ethics?
Answer: A
Diff: 3
Objective: 3
22) Morton Enterprises manufactures electronic components used in automobiles. The firm is
currently based in the U.S. but is planning to expand operations overseas. Morton's new
manufacturing facilities in China and Bangladesh are scheduled to open in six months. HR and
top executives are working together to revise the firm's code of ethics. Ten of Morton's American
managers will be relocated overseas for at least three years to manage international operations
alongside locally hired managers. Which of the following training topics would most likely
prepare expatriate managers for handling ethics issues in China and Bangladesh?
A) multilingual contexts
B) local religious customs
C) local business and ethical practices
D) global marketing methods
Answer: C
Diff: 3
Objective: 3
23) In a survey on the acceptability of bribing officials when doing business in foreign countries,
which country found bribery most unacceptable?
A) Russia
B) Austria
C) Taiwan
D) South Korea
Answer: B
Diff: 2
Skill: Concept
Objective: 3
environment
24) According to a survey on the acceptability of bribing officials when doing business in
foreign countries, which of the following was the most tolerant of bribery?
A) Sweden
B) Australia
C) Switzerland
D) South Korea
Answer: D
Diff: 2
Skill: Concept
Objective: 3
environment
25) The term ________ refers to the set of obligations an organization undertakes to protect and
enhance the society in which it functions.
A) organizational ethics
B) social responsibility
C) corporate ethics
D) social values
Answer: B
Diff: 2
Skill: Concept
Objective: 4
26) A company that is socially responsible will most likely ________.

A) do as little as possible to address social or environmental problems
B) undertake efforts to protect the society in which it functions
C) conform to regional, national, and international laws
D) follow basic ethical standards of behavior
Answer: B
Diff: 2
Skill: Concept
Objective: 4
27) The term ________ refers to those people and organizations that are directly affected by the
practices and performance of an organization.
A) corporate customers
B) permanent employees
C) community stockholders
D) stakeholders
Answer: D
Diff: 1
Skill: Concept
Objective: 5
28) Which of the following is one of the main groups of stakeholders that firms usually focus
on?
A) competitors
B) customers
C) the government
D) the general public
Answer: B
Diff: 2
Skill: Concept
Objective: 5
29) Companies that are socially responsible to their investors do which of the following?
A) provide appropriate information to shareholders and investors
B) fail to use corporate resources judiciously
C) thwart appropriate accounting procedures
D) manipulate stock prices
Answer: A
Diff: 1
Skill: Concept
Objective: 5
30) Firms such as Procter & Gamble that use recycled materials whenever possible are most
likely demonstrating their ________.
A) commitment to environmental protection
B) concern for general social welfare
C) implementation of a code of ethics
D) responsibility to stakeholders
Answer: A
Diff: 2
Skill: Concept
Objective: 5
31) Which of the following statements is most likely true about firms with formal codes of
ethics?
A) Virtually all ethical issues are eliminated from the firm.
B) Ethical training is unnecessary, redundant, and too costly to be effective.
C) Organizational practices and a strong ethical corporate culture are essential.
D) Individual codes must be developed and implemented for each subunit in the firm.
Answer: C
Diff: 3
Skill: Concept
Objective: 3
32) Examples of promoting the general welfare of society include all of the following except
________.
A) making charitable contributions
B) supporting public radio stations
C) becoming involved in local schools
D) using appropriate accounting procedures
Answer: D
Diff: 2
Skill: Concept
Objective: 5
33) Which of the following is the most resistant approach to social responsibility?
A) obstructionist stance
B) defensive stance
C) accommodative stance
D) proactive stance
Answer: A
Diff: 2
Skill: Concept
Objective: 5
34) Which of the following is the most responsible approach to social responsibility?
B) defensive stance
D) proactive stance
Answer: D
Diff: 2
Skill: Concept
Objective: 5
35) When an organization does as little as possible to address social or environmental issues, it
has adopted the ________ to social responsibility.
B) defensive stance
D) proactive stance
Answer: A
Diff: 2
Skill: Concept
Objective: 5
36) When an organization does everything it must do from a legal standpoint but nothing more, it
has adopted the ________ to social responsibility.
B) defensive stance
D) proactive stance
Answer: B
Diff: 2
Skill: Concept
Objective: 5
37) Alcoa's gift of $112,000 to a small town in Brazil to build a sewage treatment plant is an
example of ________.
A) guanxi
B) philanthropic giving
C) ethical compliance
D) legal compliance
Answer: B
Diff: 2
Skill: Concept
Objective: 5
38) Which of the following is an informal dimension of social responsibility?

A) acts of philanthropic giving
B) employment applications
C) public relations
D) organizational culture
Answer: D
Diff: 2
Skill: Concept
Objective: 5
39) Logix Manufacturing is a U.S. firm with a factory in Mexico City. Local leaders in Mexico
City ask Logix managers to make contributions to a youth sports organization. Logix provides
the league with new equipment and uniforms. Which stance towards social responsibility does
Logix most likely have?
A) proactive
B) obstructionist
C) accommodative
D) defensive
Answer: C
Diff: 2
Skill: Application
Objective: 5
40) McDonald's Ronald McDonald House program is an example of a(n) ________ to social
responsibility.
A) accommodative stance
B) proactive stance
C) obstructionist stance
D) defensive stance
Answer: B
Diff: 2
Skill: Concept
Objective: 5
41) Firms that view themselves as citizens of society have adopted the ________ to social
responsibility.
B) defensive stance
D) proactive stance
Answer: D
Diff: 2
Skill: Concept
Objective: 5
42) A company taking a proactive approach to social responsibility will most likely ________.
A) exhibit sincere and significant efforts to contribute to society
B) require employees to participate in local charities
C) conform to regional customs and laws
D) provide online ethics training
Answer: A
Diff: 2
Skill: Concept
Objective: 5
43) When tobacco companies make a decision to follow laws regarding the marketing of its
products in the United States but market its tobacco aggressively in countries without such
regulations, this is an example of which approach to social responsibility?
A) the obstructionist stance
B) the defensive stance
C) the accommodative stance
D) the proactive stance
Answer: B
Diff: 2
Skill: Application
Objective: 5
44) The Body Shop seeks out opportunities to improve the welfare of individuals all over the
world. It has adopted the ________ to social responsibility.
B) defensive stance
D) proactive stance
Answer: D
Diff: 2
Skill: Application
Objective: 5
45) According to the model developed by van Tulder and van der Zwart there are three main
actors in the policy formulation process. Which is a main actor?
A) commercial society
B) the state
C) the environment
D) the past
Answer: B
Diff: 2
Skill: Concept
Objective: 6
46) Which term refers to the disclosure by an employee of illegal or unethical conduct on the
part of others within the organization?
A) whistle-blowing
B) acknowledgement
C) conflict of interest
D) organizational communication
Answer: A
Diff: 1
Skill: Concept
Objective: 5
47) Justin is aware that his supervisor used corporate funds to pay for a personal vacation and
reports the offense. This is called ________.
A) whistle-blowing
B) acknowledgement
C) conflict of interest
D) organizational communication
Answer: A
Diff: 2
Skill: Application
Objective: 5
48) The extent to which an organization conforms to regional, national, and international laws is
known as ________.
A) guanxi
B) legal compliance
D) whistle-blowing
Answer: B
Diff: 1
Skill: Concept
Objective: 6
49) The extent to which members of an organization follow basic ethical standards of behavior is
________.
A) guanxi
B) legal compliance
D) whistle-blowing
Answer: C
Diff: 1
Skill: Concept
Objective: 6
50) A firm that wants to review the effectiveness of its social responsibility efforts should most
likely conduct a(n) ________.
A) corporate social audit
B) SWOT analysis
C) strategy session
D) HR audit
Answer: A
Diff: 1
Skill: Concept
Objective: 5
51) According to the model developed by Rob van Tulder and Alex van der Zwart, which of the
following best exhibits the cultural values of a nation's citizens?
A) the state
B) the market
C) civil society
D) competitors
Answer: C
Diff: 1
Skill: Concept
Objective: 6
52) According to the model developed by Rob van Tulder and Alex van der Zwart, Anglo-Saxon
countries view the state, the market, and civil society as ________.
A) competitive
B) symbiotic
C) supervisory
D) corrupt
Answer: A
Diff: 2
Skill: Concept
Objective: 6
53) According to the model developed by Rob van Tulder and Alex van der Zwart, firms that
adhere to the Asian Way are more likely to ________.
A) bargain with labor groups
B) promote social responsibility
C) strive for competitive advantages
D) cooperate closely with the government
Answer: D
Diff: 2
Skill: Concept
Objective: 6
54) According to the model developed by Rob van Tulder and Alex van der Zwart, what is the
key to the Continental European Approach?
A) consumer demands for quality products and services
B) cooperation between labor, business, and government
C) competition to encourage consumer market expansion
D) oversight by nongovernmental organizations
Answer: B
Diff: 2
Skill: Concept
Objective: 6
55) What is the purpose of the Foreign Corrupt Practices Act (FCPA)?
A) It prohibits the offering of bribes to any foreign government official.
B) It protects individuals from human rights abuses.
C) It inspects working conditions of factories in developing countries.
D) It prohibits conflicts of interest among employees of international businesses.
Answer: A
Diff: 3
Skill: Concept
Objective: 7
56) What is the purpose of the Alien Tort Claims Act?

A) It protects individuals from human rights abuses.
B) It eliminates bribery in international business transactions.
C) It inspects working conditions of factories in developing countries.
D) It prohibits conflicts of interest among employees of international businesses.
Answer: A
Diff: 3
Skill: Concept
Objective: 7
57) Individuals convicted under the Anti-Bribery Convention of the Organization for Economic
Cooperation and Development will most likely be required to ________.
A) pay a fine
B) serve time in jail
C) surrender their passport
D) admit to a conflict of interest
Answer: B
Diff: 2
Skill: Concept
Objective: 7
58) The primary purpose of the International Labor Organization (ILO)is to ________.
A) minimize the use of child labor by MNEs
B) eliminate extortion in international business transactions
C) monitor working conditions of factories in developing countries
D) prohibit conflicts of interest among employees of international businesses
Answer: C
Diff: 2
Skill: Concept
Objective: 7
59) Which regulation prohibits the offering of bribes to any foreign government official in order
to influence official actions or policies of that official or to gain or retain business?
A) Foreign Corrupt Practices Act
B) Helms-Burton Act
C) Alien Tort Claims Act
D) Disclosure of Conflict Act
Answer: A
Diff: 2
Skill: Concept
Objective: 7
60) Which regulation seeks to protect individuals from human rights abuses and holds MNCs
accountable for such abuses?
A) Foreign Corrupt Practices Act
B) Helms-Burton Act
C) Alien Tort Claims Act
D) Disclosure of Conflict Act
Answer: C
Diff: 3
Skill: Concept
Objective: 7
61) What organization is the major watchdog for monitoring working conditions in factories in
developing countries?
A) International Labor Organization
B) Human Rights Campaign
C) Organization for Economic Cooperation and Development
D) World Trade Organization
Answer: A
Diff: 2
Skill: Concept
Objective: 7
62) An MNE with a factory in Cambodia is being inspected by the International Labor
Organization. What is the most likely focus of the inspection?
A) excessive corruption
B) customs procedures
C) environmental violations
D) safe working conditions
Answer: D
Diff: 2
Skill: Application
Objective: 7
63) Which of the following best explains why international factory owners would most likely
want regular ILO inspections?
A) eliminate workplace corruption
B) encourage investments from MNEs
C) comply with World Trade Organization
D) earn reductions in exporting taxes and fees
Answer: B
Diff: 3
Skill: Concept
Objective: 7
Chapter 6 International Trade and Investment
1) The center of the international commercial flower industry is ________.

A) The Netherlands
B) The United States
C) France
D) Germany
Answer: A
Diff: 1
Skill: Concept
Objective: 1
2) The term ________ refers to the voluntary exchange of goods, services, assets, or money
between one person or organization and another.
A) sales
B) transaction
C) trade
D) strategic management
Answer: C
Diff: 1
Skill: Concept
Objective: 1
3) Since World War II, world trade has ________.

A) grown slightly
B) shrunk slightly
C) shrunk significantly
D) grown dramatically
Answer: D
Diff: 1
Skill: Concept
Objective: 1
4) In 2012, total international merchandise trade accounted for about ________ percent of the
world's GDP.
A) 12
B) 26
C) 44
D) 59
Answer: B
Diff: 2
Skill: Concept
Objective: 1
5) In 2012, China accounted for approximately ________ of the world's merchandise exports.
A) 10%
B) 25%
C) 40%
D) 55%
Answer: A
Diff: 2
Skill: Concept
Objective: 1
6) Ellis, a manager at an MNE, is studying international trade theories. In his current position,
Ellis would most likely use this knowledge to ________.
A) lobby for trade policy changes
B) identify promising export and investment opportunities
C) predict factors that motivate trade
D) analyze foreign exchange markets
Answer: B
Diff: 2
Skill: Application
Objective: 1
7) During which century were the first theories of international trade developed?
A) sixteenth
B) seventeenth
C) eighteenth
D) nineteenth
Answer: A
Diff: 3
Skill: Concept
Objective: 2
8) The first theories of international trade used ________ as a unit of analysis.

A) individual countries
B) country clusters
C) regions
D) continents
Answer: A
Diff: 2
Skill: Concept
Objective: 2
Learning Outcome: Compare and contrast theories of international trade
9) What type of trade were the early country-based theories of international trade most useful in
understanding?
A) services
B) brand name goods
C) commodities
D) high-tech goods
Answer: C
Diff: 2
Skill: Concept
Objective: 2
10) The theory of ________ maintains that a country's wealth is measured by its holdings of gold
and silver.
A) mercantilism
B) neomercantilism
C) competitive advantage
D) comparative advantage
Answer: A
Diff: 2
Skill: Concept
Objective: 2
11) According to mercantilism, what should a country's primary goal be?

A) protecting citizens from unfair labor practices
B) encouraging imports to prevent resource depletion
C) promoting exports to enlarge gold and silver holdings
D) ensuring sufficient labor for low-wage jobs in the textile industry
Answer: C
Diff: 2
Skill: Concept
Objective: 2
12) Which of the following was harmed the most by mercantilist policies?
A) monarchs
B) local politicians
C) individual consumers
D) domestic manufacturers
Answer: C
Diff: 2
Skill: Concept
Objective: 2
13) In the U.S., sugar growers, steel companies, and the AFL-CIO are supporters of mercantilist
policies. These groups are best characterized as ________.
A) protectionists
B) communists
C) isolationists
D) federalists
Answer: A
Diff: 2
Skill: Application
Objective: 2
14) Who is the father of free market economics?

A) David Ricardo
B) Michael Porter
C) Adam Smith
D) John Dunning
Answer: C
Diff: 1
Skill: Concept
Objective: 2
15) Which of the following statements is most likely true?

A) Japan eliminated all protectionist policies after WWII.
B) Nearly all countries have some neomercantilist policies.
C) China is one of the few countries with protectionist policies.
D) EU countries are supportive of U.S. neomercantilist policies.
Answer: B
Diff: 3
Skill: Concept
Objective: 2
16) Adam Smith was best known as an advocate of ________.

A) low-cost manufacturing
B) free-market economics
C) mercantilism
D) labor unions
Answer: B
Diff: 1
Skill: Concept
Objective: 2
17) What did Adam Smith believe about the ultimate effects of mercantilist policies on the health
of a country's economic situation?
A) Mercantilist policies strengthen an economy by protecting against competition.
B) Mercantilist policies result in strong rates of unemployment.
C) Mercantilist policies reduce the wealth of a country as a whole.
D) Mercantilist policies harm special interest groups.
Answer: C
Diff: 3
Skill: Concept
Objective: 2
18) Mercantilism ________.

A) suggests that a country should export those goods for which it is more productive than other
countries and trade for those goods for which other countries are more productive
B) maintains that a country's wealth is measured by its holdings of gold and silver
C) suggests that a country will have a comparative advantage in producing products that
intensively use resources it has in abundance
D) argues that most trade in manufactured goods should be between countries with similar per
capita incomes
Answer: B
Diff: 2
Skill: Concept
Objective: 2
19) Which theory suggests that a country should export those goods and services for which it is
more productive than other countries and import those goods and services for which other
countries are more productive?
A) mercantilism
B) comparative advantage
C) absolute advantage
D) specialization of countries
Answer: C
Diff: 2
Skill: Concept
Objective: 2
20) Which statement is asserted by the theory of absolute advantage?
A) A country should export those goods for which it is more productive than other countries and
trade for those goods for which other countries are more productive.
B) A country should import goods from developing economies in order to maximize returns on
profit and economies of scale.
C) A country will have a comparative advantage if it makes products that rely on global supply
networks.
D) Most trade in manufactured goods should be between countries with similar per capita
incomes.
Answer: A
Diff: 2
Skill: Concept
Objective: 2
21) The primary flaw in the theory of absolute advantage is that the theory ________.
A) confuses the acquisition of treasure with the acquisition of wealth
B) looks only at relative productivity differences rather than competitive differences
C) suggests that no trade will occur when one country has an absolute advantage in multiple
products
D) incorporates the concept of opportunity cost in determining which goods a country should
produce
Answer: C
Diff: 3
Skill: Concept
Objective: 2
22) Which theory suggests that a country should produce and export those goods and services for
which it is relatively more productive than other countries and import those goods and services
for which other countries are relatively more productive?
A) relative advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 2
23) The ________ of a good is the value of what is given up to get the good.
A) relative cost
B) opportunity cost
C) absolute cost
D) discount cost
Answer: B
Diff: 1
Skill: Concept
Objective: 2
24) Which theory incorporates the concept of opportunity cost?

A) comparative advantage
B) mercantilism
D) factor endowments
Answer: A
Diff: 1
Skill: Concept
Objective: 2
25) Which theory promotes the notion of specializing in what you do relatively best?
A) country similarity
C) product life cycle
D) absolute advantage
Answer: B
Diff: 1
Skill: Concept
Objective: 2
26) Which theory answers the question, "What determines the products for which a country will
have a comparative advantage?"
B) absolute advantage
C) relative factor endowments
Answer: C
Diff: 2
Skill: Concept
Objective: 2
27) Which theory listed below is also called the Heckscher-Ohlin theory?
Answer: C
Diff: 2
Skill: Concept
Objective: 2
28) The Heckscher-Ohlin theory ________.

B) states that a country should produce and export those goods for which it is relatively more
productive than other countries and import those goods for which other countries are relatively
more productive than it is
D) argues that most trade in manufactured goods should be between countries with similar per
capita incomes
Answer: C
Diff: 2
Skill: Concept
Objective: 2
29) Leontief predicted that if the Heckscher-Ohlin theory held, then the U.S. would ________.
A) import capital-intensive goods
B) import products such as steel
C) export products such as shoes
D) export bulk chemicals and steel
Answer: D
Diff: 2
Skill: Concept
Objective: 2
30) Which of the following was determined by Leontief?

A) U.S. exports were less capital intensive than imports.
B) U.S. exports were more capital intensive than imports.
C) Relative factor endowments were not a factor in determining trade patterns.
D) Specialization was not a factor in determining imports and exports.
Answer: A
Diff: 2
Skill: Concept
Objective: 2
31) Which factors of production did Leontief focus on?
A) land and labor
B) land and technology
C) capital and labor
D) labor and technology
Answer: C
Diff: 1
Skill: Concept
Objective: 2
32) The country similarity theory suggests that most trade in manufactured goods should be
between countries with similar ________.
A) labor costs
B) economic development
C) natural resources
D) cultures and languages
Answer: B
Diff: 2
Skill: Concept
Objective: 3
33) France exports wine to Japan, and Japan exports clock radios to France. This is an example
of ________.
A) mercantilism
B) diversification
C) interindustry trade
D) intraindustry trade
Answer: C
Diff: 2
Skill: Application
Objective: 3
34) Japan exports Toshiba Computers to the United States, and the United States exports Apple
Computers to Japan. This is an example of ________.
A) mercantilism
B) diversification
C) interindustry trade
D) intraindustry trade
Answer: D
Diff: 2
Skill: Application
Objective: 2
35) The country similarity theory ________.
B) states that a country should produce and export those goods for which it is relatively more
productive than other countries and import those goods for which other countries are relatively
more productive than it is
D) argues that most trade in manufactured goods should be between countries with similar levels
of economic development
Answer: D
Diff: 2
Skill: Concept
Objective: 3
36) Which international trade theory originated in the marketing field?

A) new trade theory
B) product life cycle theory
C) country similarity theory
D) theory of competitive advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 3
37) Which of the following is one of the stages in the international product life cycle theory?
A) pre-invention product stage
B) modified product stage
C) maturing product stage
D) fad product stage
Answer: C
Diff: 2
Skill: Concept
Objective: 3
38) In which stage of the international product life cycle does the innovating firm's country
become a net importer of the product?
A) new product stage
B) maturing product stage
C) standardized product stage
D) never
Answer: C
Diff: 2
Skill: Concept
Objective: 3
39) In the ________ stage of the international product life cycle, the product becomes
commodity-like and price becomes very important.
A) new product
B) maturing product
C) standardized product
D) international product
Answer: C
Diff: 2
Skill: Concept
Objective: 3
40) Which of the following is considered a form of intellectual property?

A) real estate
B) human resources
C) a brand name
D) capital investments
Answer: C
Diff: 1
Skill: Concept
Objective: 4
41) What is the primary focus of the new trade theory developed by Krugman, Helpman, and
Lancaster?
A) protecting intellectual property rights
B) expanding research and development
C) developing economies of scale
D) exploiting the experience curve
Answer: C
Diff: 2
Skill: Concept
Objective: 3
42) ________ argued that firms struggle to develop some sustainable competitive advantage
which they then exploit to dominate the global marketplace.
A) Porter
B) Vernon
C) Heckscher and Ohlin
D) Krugman and Lancaster
Answer: D
Diff: 2
Skill: Concept
Objective: 3
43) Taylor Helmets has been able to lower the average cost of producing a bicycle helmet as it
increases the number of helmets it manufactures each day. Taylor Helmets is most likely
benefiting from ________.
A) opportunity costs
B) economies of scope
C) economies of scale
D) competitive advantages
Answer: C
Diff: 2
Skill: Application
Objective: 3
44) Which theory of international trade explains that success in international trade comes from
the interaction of four country- and firm-specific elements?
A) national competitive advantage
B) country similarity
D) relative factor endowments
Answer: A
Diff: 2
Skill: Concept
Objective: 3
45) Who developed the theory of national competitive advantage?

A) Adam Smith
B) Raymond Vernon
C) Michael Porter
D) Eli Heckscher
Answer: C
Diff: 2
Skill: Concept
Objective: 3
46) Which of the following is one of the four elements discussed in the theory of national
competitive advantage?
A) factor conditions
B) opportunity costs
C) equity conditions
D) market saturation rates
Answer: A
Diff: 2
Skill: Concept
Objective: 3
47) Which of the following factors are not included in Porter's view of factor endowments?
A) land
B) capital
C) work ethic of workforce
D) educational level of workforce
Answer: C
Diff: 2
Skill: Concept
Objective: 3
48) Porter's theory of national competitive advantage can best be described as a ________.
A) country-based theory
B) firm-based theory
C) hybrid of country-based and firm-based theories
D) government-focused theory based on economies of scale
Answer: C
Diff: 2
Skill: Concept
Objective: 3
49) ________ economies occur when a firm's costs of production decline as the number of firms
in that industry increase within a given area.
A) Agglomeration
B) Consolidation
C) Accommodation
D) Divergent
Answer: A
Diff: 2
Skill: Concept
Objective: 3
50) ________ represents passive holdings of securities such as foreign stocks, bonds, or other
financial assets.
A) Foreign direct investment
B) Foreign portfolio investment
C) Capital investment
D) Controlling ownership
Answer: B
Diff: 1
Skill: Concept
Objective: 4
51) Which type of investment involves the acquisition of foreign assets for the purpose of
controlling them?
A) foreign direct investment
B) foreign portfolio investment
C) capital investment
D) controlling ownership
Answer: A
Diff: 1
Skill: Concept
Objective: 4
52) Which of the following is a form of foreign direct investment?

A) foreign stock ownership
B) foreign bond ownership
C) participation in a joint venture
D) mutual fund ownership
Answer: C
Diff: 1
Skill: Concept
Objective: 4
53) Foreign portfolio investments are most likely motivated by the desire for ________.
A) risk reduction
B) controlling ownership
C) active management
D) immediate globalization
Answer: A
Diff: 2
Skill: Concept
Objective: 4
country
54) The ________ suggests that a firm owning a valuable asset that creates a competitive
advantage domestically can use that advantage to penetrate foreign markets through FDI.
D) ownership advantage theory
Answer: D
Diff: 1
Skill: Concept
Objective: 5
country
55) Which theory explains why a firm would choose to enter a foreign market via FDI rather
than exploit its ownership advantages internationally through other means?
A) eclectic theory
B) internalization theory
D) national competitive advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 5
country
56) ________ are the costs of negotiating, monitoring, and enforcing a contract.
A) Opportunity costs
B) Transaction costs
C) Indirect costs
D) Direct costs
Answer: B
Diff: 1
Skill: Concept
Objective: 5
57) ________ suggest(s) that FDI will be more likely to occur when transaction costs with a
second firm are high.
A) Eclectic theory
B) Internalization theory
C) Ownership advantage theory
D) National competitive advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 5
58) Executives at Energex Enterprises are trying to determine whether it would be better to own
and operate a factory overseas or to contract with a foreign firm to do this through a licensing
agreement. Which theory would most likely help the Energex executives make this decision?
A) ownership advantage theory
C) eclectic theory
Answer: B
Diff: 2
Skill: Application
Objective: 5
country
59) Who developed the eclectic theory of international investment?
A) Steffan Linder
B) Raymond Vernon
C) Michael Porter
D) John Dunning
Answer: D
Diff: 1
Skill: Concept
Objective: 5
60) Which of the following is one of the conditions specified in eclectic theory for the
occurrence of foreign direct investment?
A) non-ownership advantage
B) location advantage
C) home country advantage
D) externalization advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 5
61) Examples of ownership advantage include which of the following?

A) prestige
B) liability
C) intellectual property
D) benefits of outsourcing
Answer: C
Diff: 2
Skill: Concept
Objective: 5
62) For the ________ advantage to accrue, undertaking the business activity must be more
profitable overseas than undertaking it locally.
A) ownership
B) location
C) home country
D) internalization
Answer: B
Diff: 1
Skill: Concept
Objective: 5
63) Which of the following has minimal influence on a firm's decision to undertake foreign
direct investment?
A) supply factors
B) political factors
C) demand factors
D) relative endowment factors
Answer: D
Diff: 2
Skill: Concept
Objective: 6
64) Saudi Arabia has large crude oil reserves, and Bangladesh has a large pool of skilled
workers. These are both examples of ________.
A) factor endowments
B) economies of scope
C) production factors
D) opportunity costs
Answer: A
Diff: 2
Skill: Application
Objective: 2
65) MAX Electronics produces tiny wireless speakers that can be used with computers and MP3
players. The firm has built new factories to expand capacity and meet increasing domestic and
foreign demand. Over the last six months, foreign and domestic competitors have emerged with a
similar product in an attempt to benefit from high consumer demand. MAX Electronics is most
likely in the ________ product stage of the product life cycle.
A) globalized
B) standardized
C) maturing
D) new
Answer: C
Diff: 2
Skill: Application
Objective: 3
66) Coffman Electronics produces small, portable printers. The market for the product has
stabilized, and Coffman has shifted production to Taiwan. However, Coffman's marketing
department in the U.S. remains responsible for advertising and branding decisions. Coffman
Electronics is most likely in the ________ product stage of the product life cycle.
A) globalized
B) standardized
C) maturing
D) new
Answer: B
Diff: 2
Skill: Application
Objective: 3
67) Pandora Housewares is an MNE with production facilities in Taiwan, England, and India that
manufacture bedding, towels, clothing, and luggage. Pandora has benefited from ________
because the firm's average costs have decreased as the number of different products it sells has
increased.
A) economies of scope
B) intellectual property rights
D) experience curve exploitation
Answer: A
Diff: 2
Skill: Application
Objective: 3
68) What is the most likely characteristic of a firm that gains a first-mover advantage?
A) government contractor
B) significant capital
C) natural resources
D) niche marketer
Answer: B
Diff: 2
Skill: Concept
Objective: 3
69) According to Porter, agglomeration economies lead to which of the following?

A) decreased entrepreneurship
B) growth of innovative design
C) high reliance on foreign R&D
D) less competition among suppliers
Answer: B
Diff: 2
Skill: Concept
Objective: 3
70) Which of the following is a condition of Dunning's eclectic theory?

A) The firm must own a competitive advantage that overcomes competing against foreign firms
in their markets.
B) Research and development costs must outweigh expenses related to foreign direct investment.
C) The firm must benefit more from outsourcing a service than controlling a foreign business.
D) Business activity must be more profitable in a domestic location than in a foreign location.
Answer: A
Diff: 3
Skill: Concept
Objective: 5
71) Which of the following is not a government incentive that often acts as a catalyst for FDI?
A) increased utility rates
B) inflation
C) infrastructure additions
D) a progressive tax system
Answer: C
Diff: 2
Skill: Concept
Objective: 6
Chapter 7 The International Monetary System and the Balance of Payments
1) Why does the international monetary system exist?

A) because most countries have their own currencies
B) to control interest rates on international business loans
C) to avoid monetary crises from becoming global
D) because it sets the price of a given currency
Answer: A
Diff: 2
Skill: Concept
Objective: 1
Learning Outcome: Summarize the roles of the international monetary system and global capital
market
2) The ________ establishes the rules by which countries value and exchange their currencies.
A) international monetary system
B) OECD
C) World Bank
D) Federal Reserve
Answer: A
Diff: 1
Skill: Concept
Objective: 1
3) The international monetary system provides a mechanism for ________.

A) establishing global accounting standards
B) enforcing the payment of importing tariffs and fees
C) correcting imbalances between a country's international payments and receipts
D) increasing a country's paper currency value in comparison to the global gold standard
Answer: C
Diff: 2
Skill: Concept
Objective: 1
market
4) The ________ records international transactions.
A) balance of payments accounting system
B) international accounting standards
C) gold standard procedure
D) ISO 9000 system
Answer: A
Diff: 1
Skill: Concept
Objective: 1
market
5) Which country was the first to adopt the gold standard?

A) the United Kingdom
B) Russia
C) France
D) Germany
Answer: A
Diff: 1
Skill: Concept
Objective: 2
6) The ________ refers to an international monetary system in which countries agreed to buy or
sell their paper currencies in exchange for gold on the request of any individual or firm and to
allow the free export of gold.
A) foreign exchange system
B) free market system
C) gold standard
D) mercantilism
Answer: C
Diff: 1
Skill: Concept
Objective: 2
7) Under the gold standard ________.

A) currency values were determined by supply and demand
B) countries agreed to buy or sell their paper currencies for gold
C) countries were free to adopt any nation's exchange rate system
D) the dollar's value was allowed to fall on currency markets
Answer: B
Diff: 2
Skill: Concept
Objective: 2
8) What was created by the gold standard?
A) fixed exchange rate system
B) floating exchange rate system
C) global accounting standards
D) export and import regulations
Answer: A
Diff: 2
Skill: Concept
Objective: 2
9) A(n) ________ is the price of one currency in terms of a second currency.

A) export rate
B) exchange rate
C) excise tax rate
D) interest payment
Answer: B
Diff: 1
Skill: Concept
Objective: 2
10) Under a ________, the price of a given currency does not change relative to other currency.
A) free trade agreement
B) fixed exchange rate system
C) floating exchange rate system
D) balance of payment system
Answer: B
Diff: 1
Skill: Concept
Objective: 2
11) Which term refers to linking a currency value to the value of gold?
A) exchanging
B) pegging
C) pledging
D) standardizing
Answer: B
Diff: 1
Skill: Concept
Objective: 2
12) A ________ refers to the official price of a currency in terms of gold.
A) fixed exchange rate
B) pegged rate
C) par value
D) currency rate
Answer: C
Diff: 1
Skill: Concept
Objective: 2
13) Under the gold standard, when the United States and the United Kingdom exchanged their
currencies at a rate of the $20.67/₤4.247, the exchange rate was a ________.
A) floating rate
B) fixed exchange rate
C) par value
D) pegged rate
Answer: B
Diff: 1
Skill: Application
Objective: 2
14) When firms had faith in a country's pledge to exchange its currency for gold, how did most
prefer to be paid?
A) in gold
B) in paper currency
C) in credit
D) in U.S. dollars
Answer: B
Diff: 2
Skill: Concept
Objective: 2
15) Assume you are an American exporter in 1895. What currency would you most likely want
to receive for business transactions?
A) U.S. dollar
B) British pound sterling
C) German deutschmark
D) French franc
Answer: B
Diff: 2
Skill: Application
Objective: 2
16) Between 1821 and 1918, why was the international monetary system also known as the
sterling-based gold standard?
A) economic dominance of the United Kingdom
B) fluctuating gold value in the United States
C) reliance on German banking systems
D) expansion in the United States
Answer: A
Diff: 2
Skill: Concept
Objective: 2
17) When did the sterling-based gold standard begin to unravel?

A) during World War I
B) during World War II
C) during the Civil War
D) during the Napoleonic Wars
Answer: A
Diff: 1
Skill: Concept
Objective: 2
18) Why was the gold standard suspended during World War I?
A) Transporting gold became unsafe and complicated.
B) Normal commercial transactions between countries ceased.
C) Countries implemented mercantilism by hoarding gold.
D) The Bank of England could not maintain the pound's value.
Answer: B
Diff: 2
Skill: Concept
Objective: 2
19) The term ________ means that a currency's value is determined by the forces of supply and
demand.
A) pegged
B) par value
C) float
D) market exchange
Answer: C
Diff: 1
Skill: Concept
Objective: 2
20) When the gold standard ended ________.
B) central banks sometimes manipulated exchange rates
C) countries agreed to buy or sell their paper currencies for gold
D) countries were free to adopt whatever exchange rate system best met their own requirements
E) the dollar's value was allowed to fall on currency markets
Answer: A
Diff: 2
Skill: Concept
Objective: 2
21) The Bank of England no longer redeemed British paper currency for gold at par value
________.
A) in the 1920s
B) in the 1850s
C) before 1821
D) after 1931
Answer: D
Diff: 1
Skill: Concept
Objective: 2
22) What did the Bretton Woods conferees agree to do in 1944?

A) end World War II
B) renew a modified gold standard
C) adhere to the sterling standard
D) promote a foreign exchange market
Answer: B
Diff: 2
Skill: Concept
Objective: 2
23) The Bretton Woods conference sought to do which of the following?

A) end the gold standard
B) create the International Monetary Fund
C) terminate the International Bank for Reconstruction and Development
D) provide no-interest capital loans to emerging economies around the world
Answer: B
Diff: 2
Skill: Concept
Objective: 2
24) The World Bank and the International Monetary Fund were created as part of the ________.
A) Jamaica Accord
B) Louvre Accord
C) Plaza Agreement
D) Bretton Woods Agreement
Answer: D
Diff: 2
Skill: Concept
Objective: 3
25) The International Bank for Reconstruction and Development is also known as the ________.
A) World Bank
B) International Monetary Fund
C) Organization for Economic Cooperation and Development
D) Bretton Woods Treaty
Answer: A
Diff: 1
Skill: Concept
Objective: 3
26) What was the initial goal of the World Bank?

A) administer the gold standard
B) hold financial reserves for all countries
C) finance reconstruction of war-torn economies
D) provide capital for corporate expansion activities
Answer: C
Diff: 2
Skill: Concept
Objective: 3
27) Which country holds the largest bloc of votes in the World Bank?
B) the United States
C) Germany
D) Japan
Answer: B
Diff: 1
Skill: Concept
Objective: 3
28) Country X has requested and received a loan from the World Bank. Country X may not use
the money to finance ________.
A) new railroads
B) harbor facilities
C) national highways
D) trade deficits
Answer: D
Diff: 2
Skill: Application
Objective: 3
29) ________ are those that bear significant risk of not being repaid.
A) Hard loans
B) Soft loans
C) Development loans
D) Reconstruction loans
Answer: B
Diff: 1
Skill: Concept
Objective: 3
30) The interest rate on soft loans is traditionally set at ________.

A) 0 percent to very low
B) 5 to 10 percent
C) 11 to 20 percent
D) 21 to 25 percent
Answer: A
Diff: 2
Skill: Concept
Objective: 3
31) What is the primary purpose of the International Finance Corporation?

A) make soft loans
B) make hard loans
C) promote private sector development in developing countries
D) provide political risk insurance to MNEs operating in emerging economies
Answer: C
Diff: 2
Skill: Concept
Objective: 3
32) What is the primary purpose of the Multilateral Investment Guarantee Agency?
A) make soft loans
B) make hard loans
C) promote FDI in developing countries
D) provide investors with political risk insurance
Answer: D
Diff: 2
Skill: Concept
Objective: 3
33) Which of the following was created by the Bretton Woods Agreement to facilitate the
expansion and balanced growth of international trade and to promote exchange stability?
A) World Bank
B) Inter-American Development Bank
C) International Monetary Fund
D) Multilateral Investment Guarantee Agency
Answer: C
Diff: 2
Skill: Concept
Objective: 3
market
34) Which country controls the largest bloc of votes in the IMF?
C) Germany
D) Japan
Answer: B
Diff: 1
Skill: Concept
Objective: 3
35) What determines a country's borrowing power from the IMF?

A) country size
B) loan size
C) a quota
D) aggregate demand
Answer: C
Diff: 2
Skill: Concept
Objective: 3
36) A country can borrow up to ________ percent of its quota from the IMF?
A) 25
B) 40
C) 70
D) 90
Answer: A
Diff: 1
Skill: Concept
Objective: 3
37) The leader of Country X has decided that the nation should join the IMF and has agreed to
the rules and regulations of the IMF. Now Country X must ________.
A) pay a quota to the IMF
B) locate a sponsoring IMF country
C) pay each of the IMF members an entrance fee
D) agree to an IMF investigation of government spending
Answer: A
Diff: 2
Skill: Application
Objective: 3
38) What was created by the Bretton Woods system?

A) a fixed exchange rate system
B) a floating exchange rate system
C) an accounting system
D) a export system
Answer: A
Diff: 2
Skill: Concept
Objective: 3
39) Currencies that can be freely exchanged for other currencies without legal restrictions are
called ________.
A) floating currencies
B) fixed currencies
C) convertible currencies
D) free currencies
Answer: C
Diff: 1
Skill: Concept
Objective: 3
40) Which currency played a central role in the Bretton Woods system?
A) British pound
B) German mark
C) Japanese yen
D) U.S. dollar
Answer: D
Diff: 2
Skill: Concept
Objective: 3
41) Special drawing rights, SDRs, are sometimes called ________.

A) gold-sterling
B) paper currency
C) paper gold
D) credit
Answer: C
Diff: 1
Skill: Concept
Objective: 3
42) Which of the following is calculated daily as a weighted average of the market value of four
major currencies?
A) special drawing rights
B) dollar averaging
C) exchange rate standard
D) par value
Answer: A
Diff: 2
Skill: Concept
Objective: 3
43) What decision was made at the Smithsonian Conference in 1971?

A) implement a flexible exchange rate system
B) restore the fixed exchange rate system
C) eliminate the World Bank
D) create the IMF
Answer: B
Diff: 1
Skill: Concept
Objective: 3
market
44) What resulted from the Smithsonian Conference?
A) the euro was identified as the benchmark currency
B) currencies were allowed to fluctuate freely
C) the U.S. dollar was devalued
D) the SDR was created
Answer: C
Diff: 2
Skill: Concept
Objective: 3
45) What term recognizes that in addition to private sector market forces, exchange rates are also
affected by central banks buying or selling currencies on the foreign-exchange market?
A) par value
B) flexibility
C) managed float
D) special drawing rights
Answer: C
Diff: 1
Skill: Concept
Objective: 3
46) Dirty float is another term for ________.

A) flexible float
B) managed float
C) illegal exchange
D) convertible currency
Answer: B
Diff: 1
Skill: Concept
Objective: 3
47) Under a floating exchange rate system, what determines the exchange rate for each currency?
A) par value
B) gold standard
C) pegged value
D) supply and demand
Answer: D
Diff: 1
Skill: Concept
Objective: 3
48) Under a managed float ________.
A) currency values are determined only by private sector forces
B) central banks sometime manipulate exchange rates
C) countries agree to exchange paper currencies for gold
D) countries may adopt any exchange rate system
Answer: B
Diff: 2
Skill: Concept
Objective: 3
49) Which agreement resulted in each country adopting its own exchange rate system?
A) Bretton Woods
B) Smithsonian
C) Jamaica
D) Genoa
Answer: C
Diff: 2
Skill: Concept
Objective: 4
50) What occurred at the Louvre Accord?

A) Central banks allowed the dollar's value to fall.
B) The value of the U.S. dollar was stabilized.
C) EU members adopted a common currency.
D) An exchange rate mechanism was established.
Answer: B
Diff: 2
Skill: Concept
Objective: 4
51) Under the Jamaica Agreement ________.

B) countries agreed to buy or sell their paper currencies for gold
C) countries were free to adopt any exchange rate system
D) the dollar's value was allowed to fall on currency markets
Answer: C
Diff: 2
Skill: Concept
Objective: 4
52) The ________ was created to manage currency relationships within the EU.
A) European Monetary System
B) World Bank
C) Brady Plan
D) Baker Plan
Answer: A
Diff: 1
Skill: Concept
Objective: 4
53) The ________ is a double-entry bookkeeping system designed to measure and record all
economic transactions between residents of one country and residents of all countries during a
particular time period.
A) managerial accounting
B) international accounting
C) balance of payments
D) global books
Answer: C
Diff: 1
Skill: Concept
Objective: 5
54) The balance of payments is useful to international business people for which of the following
reasons?
A) warning of new policies that could affect a country's business climate
B) indicating stability in a country's foreign policy
C) signaling increased riskiness of lending to countries
D) predicting future technological changes
Answer: A
Diff: 2
Skill: Concept
Objective: 5
55) The ________ records exports and imports of goods and services, investment income, and
gifts.
A) current account
B) capital account
C) debt account
D) official reserves account
Answer: A
Diff: 2
Skill: Concept
Objective: 5
56) The ________ records the purchases and sales of assets between residents of one country and
those of another country.
A) current account
B) capital account
C) debt account
Answer: B
Diff: 2
Skill: Concept
Objective: 5
57) The ________ records the levels of gold, convertible currencies, special drawing rights, and
reserve positions at the IMF held by a national government.
A) current account
B) capital account
C) debt account
Answer: D
Diff: 2
Skill: Concept
Objective: 5
58) The sale of a Mercedes-Benz from Germany to France would be recorded as a merchandise
export in the ________ account of Germany's balance of payments.
A) capital
B) current
C) official reserves
D) export
Answer: B
Diff: 2
Skill: Application
Objective: 5
59) Which of the following is a typical short-term foreign portfolio investments included in the
capital account?
A) government bonds
B) checking accounts
C) municipal bonds
D) special drawing rights
Answer: B
Diff: 2
Skill: Concept
Objective: 5
60) The ________ shows the difference between a country's exports of services and its imports
of services.
A) trade in visibles balance
B) balance in merchandise trade
C) balance on services trade
D) capital account
Answer: C
Diff: 2
Skill: Concept
Objective: 5
61) AeroTech, a German firm, deposits a check in a U.S. bank. The deposit will be recorded as a
________.
A) capital outflow in the U.S. BOP
B) capital inflow in the U.S. BOP
C) unilateral debit in the U.S.
D) credit to Germany's BOP
Answer: B
Diff: 2
Skill: Application
Objective: 3
62) Which of the following is a form of asset included in the official reserves account?
A) government bonds
B) inconvertible currencies
C) special drawing rights
D) reserve positions at the WTO
Answer: C
Diff: 2
Skill: Concept
Objective: 5
63) The U.S. balance of payments for 2012 shows ________.

A) that automobiles and auto parts were the largest component of U.S. merchandise exports
B) the leading import for the U.S. was consumer electronics
C) the U.S. had a negative balance on services trade
D) the U.S. exports more goods to its major trading partners than it imports
Answer: A
Diff: 3
Skill: Concept
Objective: 5
64) Carmen is a vice president at TechWorks, an MNE that manufactures computer chips.
TechWorks is considering expansion, and Carmen is responsible for identifying potential
locations. Which of the following would best help Carmen assess the competitiveness of a
country's manufacturing sector?
A) balance on services
B) balance on goods and services
C) balance on merchandise trade
D) official settlements balance
Answer: C
Diff: 2
Skill: Application
Objective: 6
65) Carmen is a vice president at TechWorks, an MNE that manufactures computer chips.
TechWorks is considering expansion, and Carmen is responsible for identifying potential
locations. Which of the following would best help Carmen identify a country's unilateral
transfers and income generated by past investments?
A) current account balance
B) official settlements balance
C) balance on merchandise trade
D) balance on goods and services
Answer: A
Diff: 2
Skill: Application
Objective: 6
66) Executives at Octagon Telecom, a global telecommunications firm, are considering investing
in a telephone company located in Rwanda. However, many stockholders have expressed
concerns about the political risk involved in such an investment. Which of the following would
most likely provide political risk insurance to Octagon?
A) International Development Association
B) African Development Bank
C) International Monetary Fund
D) Multilateral Investment Guarantee Agency
Answer: D
Diff: 2
Skill: Application
Objective: 3
market
67) Country X paid a quota to the IMF worth the equivalent of $50 million. Now, Country X
needs to borrow money from the IMF. What is the maximum amount that Country X may
borrow?
A) $7.5 million
B) $12.5 million
C) $25 million
D) $100 million
Answer: B
Diff: 2
Skill: Application
Objective: 3
market
68) Which of the following was a key element of the Baker Plan?
A) prohibiting debt
B) permitting hyperinflation
C) reducing debts of developed countries
D) continuing to lend to debtor countries
Answer: D
Diff: 2
Skill: Concept
Objective: 4
69) Executives at FDX Industries, an MNE that manufactures automotive parts, want to expand
into emerging markets. Which of the following would most likely identify potential emerging
markets and indicate reductions in a country's foreign-exchange reserves?
A) BOP statistics
B) IMF conditionality
C) par value
D) gold standard
Answer: A
Diff: 2
Skill: Application
Objective: 5
70) Country X, a member of the IMF, needs to borrow money from the IMF. The IMF has
agreed to the loan if Country X agrees to close insolvent merchant banks and lower tariffs on
many goods. Which term refers to the restrictions imposed on the loan?
A) IMF hard loan details
B) World Bank pegging
C) IMF conditionality
D) BOP provisions
Answer: C
Diff: 2
Skill: Application
Objective: 3
market
71) Todd, an analyst for the U.S. government, has been given the task of assessing the economic
performance of Country X in the international marketplace. Todd will most likely review the
________ of Country X.
A) BOP statistics
B) IMF quotas
C) portfolios
D) FDI
Answer: A
Diff: 2
Skill: Application
Objective: 5
72) Dell Computers invests excess cash balances overnight in a London bank to earn a higher
interest rate than it could earn in a New York bank. Dell is most likely making a(n) ________.
A) international currency investment
B) short-term portfolio investment
C) long-term portfolio investment
Answer: B
Diff: 2
Skill: Application
Objective: 5
Chapter 8 Foreign Exchange and International Financial Markets
1) The rising value of the Canadian dollar relative to the U.S. dollar has which of the following
effects?
A) Canadian imports to the U.S. are down.
B) Canadian vacationers pay higher costs for trips to the U.S.
C) Canadian consumers pay higher prices for U.S.-made goods.
D) Canadian retailers in border towns lose customers to U.S. stores.
Answer: D
Diff: 2
Skill: Concept
Objective: 1
Learning Outcome: Describe the functions of the foreign exchange market
2) What most likely happens when the price of yen falls?

A) the quantity of yen demanded goes down
B) the demand curve slopes downward
C) the demand curve slopes upward
D) the value of yen fluctuates
Answer: C
Diff: 2
Skill: Concept
Objective: 1
3) Which of the following is not an example of a participant in the foreign exchange market?
A) Pakistani tourists exchanging rupees for British pounds at a bank in London
B) British retailer Marks and Spenser purchasing appliances from a British supplier
C) the U.S. government arranging a multimillion-dollar loan to Mexico
D) Toyota exporting cars to Canada from factories in Japan
Answer: B
Diff: 2
Skill: Application
Objective: 1
4) A call option ________.
A) is a privately traded currency vehicle available only through stockbrokers
B) grants the right to buy a specified amount of foreign currency at a set price
C) allows the holder to buy foreign exchange at the wholesale rate
D) is another term for currency future
Answer: B
Diff: 2
Skill: Concept
Objective: 1
5) ________ is a commodity that consists of currencies issued by countries other than one's own.
A) Eurozone
B) Foreign exchange
C) Floating exchange
D) International monetary fund
Answer: B
Diff: 1
Skill: Concept
Objective: 1
6) If the British pound is selling at $1.5212 spot on September 3, and at a 90-day forward rate of
$1.5203, then ________.
A) the pound is selling at a forward premium
B) the pound is selling at a forward discount
C) an investor should buy a call option
D) speculators should buy put options
Answer: B
Diff: 3
Skill: Application
Objective: 3
7) The price of foreign exchange is set by ________.

A) the international monetary fund
B) the gold standard
C) demand and supply in the marketplace
D) administrators of the World Bank
Answer: C
Diff: 2
Skill: Concept
Objective: 1
8) A(n)________ shows the demand for a currency that is derived from foreigners' desire to
acquire the country's goods, services, and assets.
A) direct quote
B) indirect quote
C) derived demand curve
D) upward sloping curve
Answer: C
Diff: 2
Skill: Concept
Objective: 1
9) Which term refers to the price of the foreign currency in terms of the home currency?
A) direct exchange rate
B) indirect quote
C) indirect exchange rate
D) direct spot price
Answer: A
Diff: 1
Skill: Concept
Objective: 1
10) Tyler, a U.S. citizen, received a quote on the dollar/yen relationship of ¥108.21/$1. Tyler
most likely received a(n) ________ quote.
A) indirect
B) direct
C) yen
D) dollar
Answer: A
Diff: 2
Skill: Application
Objective: 1
11) A(n) ________ is the price of the home currency in terms of the foreign currency.
A) direct exchange rate
B) direct quote
C) indirect exchange rate
D) indirect rate price
Answer: C
Diff: 1
Skill: Concept
Objective: 1
12) Carol, an American banker, received a quote between the U.S. dollar and the Japanese yen of
$.00924/¥1. Carol most likely received a(n) ________ quote.
A) indirect
B) direct
C) dollar
D) yen
Answer: B
Diff: 2
Skill: Application
Objective: 1
13) Worldwide volume of foreign exchange trading is about ________ per day.
A) $2 billion
B) $50 billion
C) $2 trillion
D) $4 trillion
Answer: D
Diff: 1
Skill: Concept
Objective: 1
14) The world's largest trading markets include which one of the following?
A) London
B) Frankfurt
C) Dallas
D) Peking
Answer: B
Diff: 2
Skill: Concept
Objective: 1
15) What percentage of all foreign-exchange trading involves the U.S. dollar?
A) 25%
B) 47%
C) 70%
D) 85%
Answer: D
Diff: 2
Skill: Concept
Objective: 1
16) ________ assume exchange rate risks by acquiring positions in a currency and hoping that
they can correctly predict changes in the currency's market value.
A) Commercial customers
B) Speculators
C) Arbitrageurs
D) Individuals
Answer: B
Diff: 2
Skill: Concept
Objective: 2
17) ________ attempt to exploit small differences in the price of a currency between markets by
buying currencies in lower-priced markets and selling in higher-priced markets.
A) Commercial customers
B) Speculators
C) Arbitrageurs
D) Individuals
Answer: C
Diff: 2
Skill: Concept
Objective: 4
18) Currencies that are freely tradable are called ________.

A) hard currencies
B) soft currencies
C) foreign currencies
D) inconvertible currencies
Answer: A
Diff: 1
Skill: Concept
Objective: 2
19) Which of the following would be considered a soft currency?

A) Swiss franc
B) Mexican peso
C) Canadian dollar
D) U.S. dollar
Answer: B
Diff: 2
Skill: Concept
Objective: 2
20) An inconvertible currency ________.
A) is a foreign exchange transaction that is consummated immediately
B) is a foreign exchange transaction that occurs sometime in the future
C) involves currencies that are not freely tradable
D) involves a transaction in which the same currency is bought and sold simultaneously
Answer: C
Diff: 2
Skill: Concept
Objective: 2
21) The ________ consists of foreign-exchange transactions that are to be consummated

immediately.
A) soft currency market
B) spot market
C) hard currency market
D) forward market
Answer: B
Diff: 1
Skill: Concept
Objective: 3
22) The ________ consists of foreign-exchange transactions that are to occur sometime in the
future.
A) soft currency market
B) spot market
C) hard currency market
D) forward market
Answer: D
Diff: 1
Skill: Concept
Objective: 3
23) In the world of spot markets, what is the meaning of immediately?

A) two days after the trade date
B) four business days after the trade date
C) on the trade date
D) simultaneous due to electronic transfers
Answer: A
Diff: 2
Skill: Concept
Objective: 3
24) What percentage of all foreign exchange transactions take place in the spot market?
A) 10 percent
B) 24 percent
C) 33 percent
D) 47 percent
Answer: C
Diff: 3
Skill: Concept
Objective: 3
25) A spot transaction ________.

C) involves currencies that are not freely tradeable
Answer: A
Diff: 1
Skill: Concept
Objective: 3
26) A forward transaction ________.

Answer: B
Diff: 1
Skill: Concept
Objective: 3
27) A swap transaction ________.

Answer: D
Diff: 1
Skill: Concept
Objective: 3
28) A ________ is a contract for a standard amount on a standard delivery date.
A) forward contract
B) currency future
C) currency option
D) call option
Answer: B
Diff: 1
Skill: Concept
Objective: 3
29) What is a currency selling at if the forward price is less than the spot price?
A) forward premium
B) forward discount
C) par value
D) swap price
Answer: B
Diff: 2
Skill: Concept
Objective: 3
30) A ________ allows, but does not require, a firm to buy or sell a specified amount of foreign
currency at a specified price on a specified date.
A) forward swap
B) currency option
C) call option
D) discount put
Answer: B
Diff: 1
Skill: Concept
Objective: 3
31) Apex Enterprises wants the right to buy a foreign currency at a specified price at any time up
to a specified date. Apex most likely needs a ________.
A) forward premium
B) forward discount
C) call option
D) put option
Answer: C
Diff: 2
Skill: Application
Objective: 3
32) Moffet Manufacturing wants the right to sell a foreign currency at a specified price at any
time up to a specified date. Moffet most likely needs a ________.
A) forward premium
B) forward discount
C) call option
D) put option
Answer: D
Diff: 2
Skill: Application
Objective: 3
33) What is a currency selling at if the forward price is higher than the spot price?
A) forward premium
B) forward discount
C) par value
D) swap value
Answer: A
Diff: 2
Skill: Concept
Objective: 3
34) The ________ represents the marketplace's aggregate prediction of the spot price of the
currency rate in the future.
A) forward price
B) spot price
C) exchange rate
D) par value
Answer: A
Diff: 1
Skill: Concept
Objective: 3
35) The currencies of countries suffering from balance of payment trade deficits or high inflation
rates are more likely to sell at a ________.
A) spot discount
B) spot premium
C) forward discount
D) forward premium
Answer: C
Diff: 2
Skill: Concept
Objective: 3
36) If a currency is selling at a forward premium it most likely means that the foreign-exchange
market believes that the ________.
A) currency will depreciate over time
B) country's economy is weak
C) currency will appreciate over time
D) country's economy is strong
Answer: C
Diff: 2
Skill: Concept
Objective: 3
37) The currencies of countries enjoying BOP trade surpluses or low inflation rates are more
likely to sell at a ________.
A) spot discount
B) spot premium
C) forward discount
D) forward premium
Answer: D
Diff: 2
Skill: Concept
Objective: 3
38) If a currency is selling at a forward discount it means that the foreign-exchange market most
likely believes that the ________.
A) currency will depreciate over time
B) country's economy is weak
C) currency will appreciate over time
D) country's economy is strong
Answer: A
Diff: 2
Skill: Concept
Objective: 3
39) ________ is the riskless purchase of a product in one market for immediate resale in a
second market in order to profit from a price discrepancy.
A) Commercial exchange
B) Foreign exchange
C) Arbitrage
D) Parity
Answer: C
Diff: 1
Skill: Concept
Objective: 4
40) The theory of ________ states that the prices of tradable goods, when expressed in a
common currency, will tend to equalize across countries as a result of exchange rate changes.
A) supply and demand
B) purchasing power parity
C) arbitrage
D) competitive advantage
Answer: B
Diff: 2
Skill: Concept
Objective: 4
41) ________ suggests that arbitrage activities will continue until the price of the good is
identical in both markets.
A) Purchasing power parity
B) The law of one price
C) Equilibrium pricing
D) Two-point arbitrage
Answer: B
Diff: 2
Skill: Concept
Objective: 3
42) Euroloans are often quotes at which of the following rates?

A) LIBOR
B) the euro rate
C) prime plus 2 percent
D) prime plus .5 percent
Answer: A
Diff: 2
Skill: Concept
Objective: 5
43) Which of the following is a common form of foreign exchange arbitrage?

A) two-point arbitrage
B) long-distance arbitrage
C) internet arbitrage
D) uncovered interest
Answer: D
Diff: 2
Skill: Concept
Objective: 4
44) Which form of arbitrage involves profiting from price differences in two distinct markets?
A) geographic arbitrage
B) three-point arbitrage
C) covered interest
D) arbitrage of goods
Answer: A
Diff: 2
Skill: Concept
Objective: 4
45) Suppose £1 is trading for $2.00 in New York City and $1.80 in London. A foreign exchange
trader could take $1.80 and buy £1 in London's financial exchange market and then sell it for
$2.00 in New York's financial exchange market. What is this an example of?
C) covered interest
Answer: A
Diff: 2
Skill: Application
Objective: 4
46) Two-point arbitrage is also known as ________.

A) equilibrium arbitrage
B) forward arbitrage
C) discount arbitrage
D) geographic arbitrage
Answer: D
Diff: 1
Skill: Concept
Objective: 4
47) ________ is profitable whenever the cost of buying a currency directly differs from the cross
rate of exchange.
A) Two-point arbitrage
B) Three-point arbitrage
C) Covered interest
D) Arbitrage of goods
Answer: B
Diff: 2
Skill: Concept
Objective: 4
48) The ________ is an exchange rate between two currencies calculated through the use of a
third currency.
A) forward rate
B) call rate
C) cross rate
D) covered interest rate
Answer: C
Diff: 1
Skill: Concept
Objective: 4
49) The ________ is the primary third currency used in calculating cross rates.
A) euro
B) U.S. dollar
C) Japanese yen
D) Swiss franc
Answer: B
Diff: 1
Skill: Concept
Objective: 4
50) What kind of arbitrage occurs when the difference between two countries' interest rates is not
equal to the forward discount/premium on their currencies?
C) covered interest
D) geographic arbitrage
Answer: C
Diff: 2
Skill: Concept
Objective: 4
51) Which form of arbitrage is considered the most important in the foreign-exchange market?
C) covered interest
Answer: C
Diff: 2
Skill: Concept
Objective: 4
52) ________ suggests that national differences in expected inflation rates yield differences in
nominal interest rates among countries.
A) Two-point arbitrage
B) Three-point arbitrage
C) The international Fisher effect
D) The law of one market price
Answer: C
Diff: 1
Skill: Concept
Objective: 4
53) When an overseas banking operation is separately incorporated from the parent bank, what is
it called?
A) subsidiary bank
B) branch bank
C) affiliated bank
D) correspondent bank
Answer: A
Diff: 2
Skill: Concept
Objective: 2
54) When an overseas banking operation is incorporated within the parent bank, what is it
called?
A) subsidiary bank
B) branch bank
C) affiliated bank
Answer: B
Diff: 2
Skill: Concept
Objective: 2
55) When an overseas banking operation is jointly owned by a parent bank and a local or foreign
partner, what is it called?
A) subsidiary bank
B) branch bank
C) affiliated bank
Answer: C
Diff: 2
Skill: Concept
Objective: 2
56) What is a Eurodollar?
A) a euro held by an American
B) a U.S. dollar deposited in a European bank
C) a euro deposited in a U.S. bank.
D) any currency deposited in a country other than the country of issue
Answer: B
Diff: 2
Skill: Concept
Objective: 2
57) What term refers to a currency on deposit outside its country of issue?
A) Eurocurrency
B) Eurodollar
C) Euroyen
D) Europound
Answer: A
Diff: 1
Skill: Concept
Objective: 2
58) Which of the following is a true statement about the Euroloan market?
A) It is extremely competitive and lenders operate on razor-thin margins.
B) It is extremely competitive but lenders still receive substantial margins.
C) It is monopolistic, yet lenders operate on razor-thin margins.
D) It is monopolistic and lenders receive substantial margins.
Answer: A
Diff: 2
Skill: Concept
Objective: 2
market
59) On the basis of which interest rate are Euroloans often quoted?
A) United States Prime Rate
B) European Central Bank Offer Rate
C) London Interbank Offer Rate
D) International Monetary Fund Interest Rate
Answer: C
Diff: 1
Skill: Concept
Objective: 2
60) The international bond market is a major source of debt financing for which of the
following?
A) world governments
B) regional organizations
C) small firms
D) small businesses
Answer: A
Diff: 2
Skill: Concept
Objective: 5
market
61) A(n) ________ is a large, liquid financial asset that can be traded anywhere at any time.
A) international stock
B) global bond
C) global equity
D) Eurodollar
Answer: B
Diff: 1
Skill: Concept
Objective: 5
market
62) ________ focus on offering banking and other financial services to nonresident customers.
A) Subsidiary banks
B) Branch banks
C) Affiliated banks
D) Offshore financial centers
Answer: D
Diff: 2
Skill: Concept
Objective: 2
63) A bond that is issued by Nestle, a Swiss company, that is denominated in yen and sold to
residents of Japan is most likely a ________.
A) Eurobond
B) global bond
C) foreign bond
D) country fund
Answer: C
Diff: 2
Skill: Application
Objective: 5
market
64) Which of the following countries is an important offshore financial center?
A) Turks and Caicos
B) Mexico
C) South Korea
D) Bermuda
Answer: D
Diff: 2
Skill: Concept
Objective: 5
65) Which of the following is a characteristic of most offshore financial centers?

A) political stability
B) services for residents
C) accounting scandals
D) a lack of legal expertise
Answer: A
Diff: 2
Skill: Concept
Objective: 5
market
66) A ________ is a mutual fund that specializes in investing in a given country's firms.
A) country fund
B) global equity fund
C) high-risk fund
D) localization fund
Answer: A
Diff: 1
Skill: Concept
Objective: 5
market
67) The primary purpose of the foreign-exchange market is to ________.

A) encourage globalization
B) assist developing countries
C) facilitate currency conversions
D) stabilize the currency exchange rate
Answer: C
Diff: 2
Skill: Concept
Objective: 1
68) The ________ tries to exploit differences in the interest rates between countries.
A) currency option
B) country fund
C) collective rate
D) carry trade
Answer: D
Diff: 2
Skill: Concept
Objective: 5
69) Ross Manufacturing wants to sell foreign exchange on a spot basis and contracts with an
international bank to handle the transaction. What is the most likely reason that Ross uses an
international bank in this case?
A) The bank can customize the spot to meet Ross' needs.
B) Laws require that banks handle spot transactions.
C) The bank will not charge Ross a service fee.
D) Ross is a U.S. organization.
Answer: A
Diff: 3
Skill: Synthesis
Objective: 2, 3
70) Which of the following would most likely help international businesspeople to forecast
future changes in exchange rates?
A) swap transaction
B) forward price
C) put option
D) spot price
Answer: B
Diff: 1
Skill: Concept
Objective: 3
Chapter 9 Formulation of National Trade Policies
1) ________ implies that the national government exerts minimal influence on the exporting and
importing decisions of private firms and individuals.
A) Fair trade
B) Free trade
C) Managed trade
D) Equitable trade
Answer: B
Diff: 1
Skill: Concept
Objective: 1
2) Free trade ________.

A) is another term for managed trade
B) implies that the national government exerts minimal influence on the exporting and importing
decisions of private firms
C) proposes that national governments should directly help domestic firms by providing export
subsidies and tax breaks
D) suggests that the national government should actively intervene to ensure that domestic firms'
exports receive an equitable share of foreign markets and that imports are controlled to minimize
losses of domestic jobs and market share in specific industries
Answer: B
Diff: 2
Skill: Concept
Objective: 1
3) Fair trade is sometimes called ________.

A) managed trade
B) manipulated trade
C) illusory trade
D) right trade
Answer: A
Diff: 1
Skill: Application
Objective: 1
business
4) The "level playing field" argument is primarily used to justify government policies that
________.
A) reduce import tariffs
B) restrict foreign competition
C) establish regional trade blocs
D) manipulate foreign exchange
Answer: B
Diff: 2
Skill: Concept
Objective: 1
business
5) The ________ holds that a country must be self-sufficient in critical raw materials, machinery,
and technology or it will be vulnerable to foreign threats.
A) national defense argument
B) infant industry argument
C) industrial policy
D) strategic trade theory
Answer: A
Diff: 2
Skill: Concept
Objective: 1
business
6) The ________ proposes that tariffs be imposed on imported manufactured goods to give U.S.
firms temporary protection from foreign competition until they can fully establish themselves.
B) infant industry argument
Answer: B
Diff: 2
Skill: Concept
Objective: 1
business
7) The determination of which industries deserve infant industry protection is often done
________.
A) on a political basis
B) on an economic basis
C) by happenstance
D) on an environmental basis
Answer: A
Diff: 2
Skill: Concept
Objective: 3
business
8) For which industry did Alexander Hamilton propose the infant industry argument?
A) manufacturing
B) electronics
C) merchant marine
D) farming
Answer: A
Diff: 1
Skill: Concept
Objective: 1
9) For five years, Harley-Davidson received tariff protection from Japanese imports to allow the
motorcycle firm the opportunity to improve its operations and gain market share. This is an
example of the ________.
A) maintenance of existing jobs argument
B) industrial policy argument
C) infant industry argument
Answer: A
Diff: 2
Skill: Application
Objective: 1
business
10) ________ suggests that a national government can make its country better off if it adopts
trade policies that improve the competitiveness of its domestic firms in oligopolistic industries.
A) National defense argument
B) Infant industry argument
C) Maintenance of existing jobs
D) Strategic trade theory
Answer: D
Diff: 2
Skill: Concept
Objective: 1
business
11) Which country has been particularly successful at nurturing domestic industries through
government intervention?
A) China
B) India
C) Germany
D) Japan
Answer: D
Diff: 2
Skill: Concept
Objective: 1
12) Which theory best applies to those industries capable of supporting only a few firms
worldwide?
B) industrial policy
C) maintenance of existing jobs
Answer: D
Diff: 2
Skill: Concept
Objective: 1
business
13) Strategic trade theory applies best to which industry identified below?
A) air transportation
B) commercial aircraft construction
C) farming
D) automobile manufacturing
Answer: B
Diff: 2
Skill: Concept
Objective: 1
business
14) Which theory specifically addresses the needs of individual industries?

A) strategic trade theory
B) economic development programs
D) public choice analysis
Answer: A
Diff: 2
Skill: Concept
Objective: 1
business
15) The government of Country X is encouraging the growth of domestic manufacturing by

implementing high barriers to imported goods. Country X is most likely following a strategy of
________.
A) strategic trade
B) export promotion
C) import substitution
D) industrial development
Answer: C
Diff: 2
Skill: Application
Objective: 1
16) ________ suggests that a country should encourage firms to compete in foreign markets by
harnessing some advantage the country possesses.
A) Strategic trade theory
B) Export promotion strategy
C) Import substitution strategy
D) Import promotion strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 1
business
17) ________, once heavily dependent on cocoa, began an industrialization program to protect
itself from fluctuations in cocoa prices.
A) Austria
B) Ghana
C) Brazil
D) The Hershey Company
Answer: B
Diff: 2
Skill: Concept
Objective: 3
18) The government of Country X actively manages the national economy by providing
subsidies to aerospace firms and automobile manufacturers. Country X most likely engages in
________.
A) trade blocs
B) industrial policies
C) export promotion strategies
D) import substitution policies
Answer: B
Diff: 2
Skill: Application
Objective: 2
19) Which country listed below followed industrial policy to achieve economic success?
A) Japan
B) the U.S.
C) Canada
D) Germany
Answer: A
Diff: 2
Skill: Concept
Objective: 2
20) What Japanese organization is entrusted with setting industrial policy?

A) Ministry of International Trade and Industry
B) Industrial Policy Ministry
C) Office of Strategic Trade
D) Ministry of Industry Development
Answer: A
Diff: 1
Skill: Concept
Objective: 2
21) ________ suggest(s) that special interest groups will often dominate the general interest on
any given issue because these groups are willing to work for the passage of laws.
A) Strategic trade theory
B) Economic development programs
C) Industrial policy
D) Public choice analysis
Answer: D
Diff: 2
Skill: Concept
Objective: 3
22) According to public choice analysis, domestic trade policies that affect international business
have a tendency to develop from ________.
A) political goals
B) economic needs
C) foreign competition
D) corporate litigation
Answer: A
Diff: 2
Skill: Concept
Objective: 3
23) A(n) ________ is a tax placed on a good that is traded internationally.

A) tariff
B) quota
C) par value
D) import substitute
Answer: A
Diff: 1
Skill: Concept
Objective: 4
24) Country X applies a tariff on goods as they leave the country. Country X most likely imposes
a(n) ________ tariff.
A) transit
B) ad valorem
C) specific
D) export
Answer: D
Diff: 2
Skill: Application
Objective: 4
25) Products manufactured in Brazil are transported through Mexico on their way to England.
Mexico applies a tariff on the goods. What type of tariff is implemented by Mexico?
A) transit tariff
B) ad valorem tariff
C) export tariff
D) compound tariff
Answer: A
Diff: 2
Skill: Application
Objective: 4
26) What type of tariff is assessed as a percentage of the market value of the imported good?
A) transit tariff
C) specific tariff
D) compound tariff
Answer: B
Diff: 2
Skill: Concept
Objective: 4
27) What type of tariff is assessed as a specific dollar amount per unit of weight or other standard
measure?
A) ad valorem tariff
B) specific tariff
C) export tariff
D) compound tariff
Answer: B
Diff: 2
Skill: Concept
Objective: 4
28) What type of tariff includes both ad valorem components and specific components?
A) transit tariff
B) harmonized tariff
C) export tariff
D) compound tariff
Answer: D
Diff: 2
Skill: Concept
Objective: 4
29) Which of the following is an import tariff?

A) transit tariff
C) sua sponte tariff
D) complex tariff
Answer: B
Diff: 2
Skill: Concept
Objective: 4
30) Most tariffs imposed by developed countries are ________.
A) transit tariffs
B) specific tariffs
C) ad valorem tariffs
D) compound tariffs
Answer: C
Diff: 2
Skill: Concept
Objective: 4
31) Famous Footwear imports a variety of athletic shoes, work boots, and casual footwear from
around the world. Which of the following would most likely provide Famous Footwear with a
detailed classification scheme for its imported shoes?
A) tariff rate quota
B) ad valorem report
C) compound tariff report
D) harmonized tariff schedule
Answer: D
Diff: 2
Skill: Application
Objective: 4
32) Any government regulation, policy, or procedure other than a tariff that has the effect of
impeding international trade may be labeled a(n) ________.
A) nontariff barrier
C) compound tariff
D) export restraint
Answer: A
Diff: 1
Skill: Concept
Objective: 4
33) Country X protects its domestic manufacturers from foreign competition by using a variety
of nontariff barriers. Which of the following is not one of those nontariff barriers?
A) foreign trade zones
B) product standards
C) regulatory controls
D) local purchase requirements
Answer: A
Diff: 2
Skill: Application
Objective: 4
34) A ________ is a numerical limit on the quantity of a good that may be imported into a
country during some time period.
A) quota
B) numerical export control
C) voluntary export restraint
D) regulatory control
Answer: A
Diff: 2
Skill: Concept
Objective: 4
35) As a result of trade agreements, many countries have replaced quotas with ________.
A) tariff rate quotas
B) numerical export controls
C) voluntary export restraints
D) regulatory controls
Answer: A
Diff: 2
Skill: Concept
Objective: 4
36) A(n) ________ imposes a low tariff rate on a limited amount of imports of a specified good,
but imposes a prohibitively high tariff on the good above that limited amount.
B) numerical export control
D) ad valorem tariff
Answer: A
Diff: 2
Skill: Concept
Objective: 4
37) The U.S. government has decided to impose a tariff rate quota on sugar imports into the
United States. Which of the following would benefit from this decision?
A) soft drink producers
B) domestic sugar producers
C) steel producers
D) consumers of sugar products
Answer: B
Diff: 2
Skill: Application
Objective: 4
38) The U.S. government has decided to impose a tariff rate quota on sugar imports into the
United States. Which of the following would benefit the most from this decision?
A) domestic candy producers
B) sugar substitute producers
C) soft drink producers
D) U.S. consumers
Answer: B
Diff: 2
Skill: Application
Objective: 4
39) A(n) ________ is a promise by a country to limit its export of a good to another country to a
pre-specified amount or percentage of the affected market.
B) export promise
D) embargo
Answer: C
Diff: 1
Skill: Concept
Objective: 4
40) A(n) ________ is an absolute ban on the exporting and importing of goods to a particular
destination.
A) voluntary export restraint
B) embargo
C) ad valorem tariff
D) tariff rate quota
Answer: B
Diff: 1
Skill: Concept
Objective: 4
41) Since the 1960s, the United States has maintained an embargo against ________.
A) Russia
B) China
C) North Korea
D) Cuba
Answer: D
Diff: 1
Skill: Concept
Objective: 3
42) Local purchase requirements, investment controls, and product and testing standards are all
forms of ________.
A) numerical export controls
B) voluntary export restraints
C) nontariff barriers
D) embargoes
Answer: C
Diff: 2
Skill: Concept
Objective: 4
43) The federal government policy that international air travel purchased with U.S. government
funds must occur on U.S. airlines is an example of which type of nontariff barrier?
A) restricted access to distribution networks
B) numerical export controls
C) public-sector procurement policies
D) local-purchase requirements
Answer: C
Diff: 2
Skill: Application
Objective: 4
business
44) ________ is a term used to denote 17 different minerals that are critical for the production of
high-tech products.
A) Tech gems
B) Dirty tech
C) Rare earths
D) Neo-elements
Answer: C
Diff: 2
Skill: Application
Objective: 4
business
45) Public-sector procurement policies are common in Country X. Which of the following is the
most likely characteristic of Country X?
A) extensive state ownership of industry
B) highly educated labor force
C) numerous small firms
D) minimal tariffs
Answer: A
Diff: 3
Skill: Application
Objective: 4
46) Which of the following is an example of a product and testing standards nontariff barrier?
A) Malaysia's requirement that during prime time at least 40 percent of the songs on the radio be
by local artists
B) Brazil's requirement that new pharmaceutical products undergo clinical testing in Brazil
C) China's policy that imported sugar be distributed only by state-owned enterprises
D) Canada's requirement that organic baby food be manufactured locally
Answer: B
Diff: 3
Skill: Application
Objective: 4
47) Which of the following is an example of a nontariff barrier that restricts access to distribution
networks?
A) Malaysia's requirement that during prime time at least 40 percent of the songs on the radio be
by local artists
B) Turkmenistan's requirement that all imports of consumer goods be approved by the State
Standards Committee
D) Canada's requirement that baby food be packaged in 4.5- and 7.5-ounce containers
Answer: C
Diff: 3
Skill: Application
Objective: 4
48) An example of a public-sector procurement policy non tariff barrier is the ________.
A) ATM restrictions in Thailand
B) "Buy American" policy in the U.S.
C) encryption technology rules in Russia
D) foreign exchange requirements in Ethiopia
Answer: B
Diff: 3
Skill: Application
Objective: 4
49) Which of the following is an example of a regulatory control nontariff barrier?

A) Malaysia's policy that during prime time at least 40 percent of the songs on the radio be by
local artists
B) Egypt's 15% bidding preference on public contracts
D) Canada's requirement that baby food be packaged in 4.5- and 7.5-ounce containers
Answer: B
Diff: 3
Skill: Application
Objective: 4
50) France's requirement that during prime time at least 40 percent of the songs played on 1700
AM and FM stations must be written or sung by French or Francophone artists is an example of
which type of nontariff barrier?
A) product and testing standards
B) restricted access to distribution networks
C) numerical export controls
D) public-sector procurement policies
E) local-purchase requirements
Answer: E
Diff: 2
Skill: Application
Objective: 4
51) Which of the following is not an example of regulatory controls as a form of nontariff
barrier?
A) Country A conducts inspections of all imported luggage and baggage.
B) Country B requires foreign firms to obtain licenses before constructing plants.
C) Country C requires domestic producers of cosmetics to obtain government product
registration.
D) Country D offers tourists a separate exchange rate than what is offered to importers.
Answer: B
Diff: 3
Skill: Application
Objective: 4
52) ________ make it more difficult for importers of nonessential goods to acquire foreign
exchange.
A) Currency controls
B) Restricted access to distribution networks
C) Numerical export controls
D) Public-sector procurement policies
Answer: A
Diff: 2
Skill: Concept
Objective: 4
53) ________ is/are common in key industries like broadcasting, utilities, air transportation,
defense contracting, and financial services.
A) Restricted access to distribution networks
B) Investment controls
C) Public-sector procurement policies
D) Quotas
Answer: B
Diff: 2
Skill: Concept
Objective: 4
54) Country X wants to stimulate exports. Which of the following would most likely help
Country X achieve this goal?
A) subsidies
B) currency controls
C) investment controls
D) quotas
Answer: A
Diff: 2
Skill: Application
Objective: 5
55) Which of the following would most likely be used as a subsidy to entice firms to locate or
expand facilities in a particular community?
A) quotas
B) an embargo
C) a granting of corporate citizenship status
D) reduced utility rates
Answer: D
Diff: 2
Skill: Concept
Objective: 5
56) A(n) ________ is a geographic area where imported or exported goods receive preferential
tariff treatment.
A) free trade zone
B) foreign trade zone
C) fair trade zone
D) economic incentive zone
Answer: B
Diff: 1
Skill: Concept
Objective: 5
57) A foreign trade zone is primarily used by governments to ________.

A) protect currency rates
B) enforce tariffs and duties
C) monitor foreign investments
D) spur economic development
Answer: D
Diff: 2
Skill: Concept
Objective: 5
58) A ________ refers to any factory located in an FTZ in Mexico.
A) maquiladora
B) greenfield operation
C) keiretsu
D) chaebol
Answer: A
Diff: 1
Skill: Concept
Objective: 5
59) A(n) ________ is calculated to offset the advantage an exporter receives from a subsidy.
A) compound tariff
B) export promotion
C) countervailing duty
D) substitution tariff
Answer: C
Diff: 2
Skill: Concept
Objective: 6
60) Which agency initially investigates complaints about unfair trade practices in the United
States?
A) Overseas Private Investment Corporation
B) Federal Trade Commission
C) International Trade Administration
D) World Trade Organization
Answer: C
Diff: 2
Skill: Concept
Objective: 6
61) ________ can occur when a firm sells its goods in a foreign market at a price below what it
charges in its home market.
A) Predatory pricing
B) Dumping
C) Foreign trade duties
D) Subsidies
Answer: B
Diff: 1
Skill: Concept
Objective: 6
62) Most critics of unfair trade practice laws are concerned that such laws ________.
A) promote globalization
B) encourage mercantilism
C) fail to protect poor consumers
D) serve as protectionist trade barriers
Answer: D
Diff: 2
Skill: Concept
Objective: 6
business
63) In many cases, tariffs are imposed for the purpose of ________.
A) increasing national government revenue
B) complying with trade regulations
C) increasing foreign trade activity
D) promoting consumer safety
Answer: A
Diff: 2
Skill: Concept
Objective: 4
64) Country X imposes a low tariff rate for the first 5,000 pounds of rice it imports from Japan
and a high tariff rate on all imported rice above this threshold. Country X most likely uses a
________.
A) free trade zone
B) tariff rate quota
C) foreign currency control
D) voluntary export restraint
Answer: B
Diff: 2
Skill: Application
Objective: 4
65) A voluntary export control is most likely used to ________.

A) punish political enemies
B) appeal to domestic politicians
C) avoid trade conflicts with friendly trade partners
D) comply with strict product and testing standards
Answer: C
Diff: 2
Skill: Concept
Objective: 4
Chapter 10 International Cooperation Among Nations
1) What is the best means of promoting economic development in Mexico?

A) trade
B) mercantilism
C) protectionism
D) export substitutions
Answer: A
Diff: 2
Skill: Concept
Objective: 1
2) Mexico relied on which of the following trade activities between 1917 and 1982?
A) low import tariffs
B) foreign direct investment restrictions
C) privatization of key industries
D) membership in GATT and the WTO
Answer: B
Diff: 2
Skill: Concept
Objective: 1
3) The average hourly manufacturing wage in Mexico is estimated to be ________.

A) $0.90
B) $1.50
C) $3.00
D) $4.50
Answer: C
Diff: 2
Skill: Concept
Objective: 2
4) Mexico does not have a trade agreement with ________.

A) Japan
B) Chile
C) Israel
D) India
Answer: D
Diff: 2
Skill: Concept
Objective: 2
5) Which country represents the biggest threat to Mexico's trade-driven economy?
A) Taiwan
B) Vietnam
C) China
D) Brazil
Answer: C
Diff: 1
Skill: Concept
Objective: 2
6) GATT is an acronym for ________.

A) General Argument for Taxes and Tariffs
B) General Agreement on Tariffs and Trade
C) Group Accord on Trade Tendencies
D) Grace, Action, Trust, and Trade
Answer: B
Diff: 1
Skill: Concept
Objective: 1
7) What organization replaced the GATT?

A) World Bank
B) World Trade Organization
C) International Trade Commission
D) NAFTA
Answer: B
Diff: 1
Skill: Concept
Objective: 1
8) The Smoot-Hawley Act ________.

A) lowered tariffs to encourage trade
B) raised tariffs to protect domestic industries
C) designated the International Trade Organization as an independent party in trade negotiations
D) required that countries treat each other on a nondiscriminatory basis and outlawed unfair
trading practices
Answer: B
Diff: 3
Skill: Concept
Objective: 1
9) The primary goal of the ________ was to promote a free and competitive international trading
environment.
A) Smoot-Hawley Act
B) International Trade Organization
C) World Trade Organization
D) General Agreement on Tariffs and Trade
Answer: D
Diff: 2
Skill: Concept
Objective: 1
10) The cumulative effect of GATT in developed countries was a ________.

A) substantial reduction in tariffs
B) small increase in tariffs
C) substantial increase in tariffs
D) reduction in world trade
Answer: A
Diff: 2
Skill: Concept
Objective: 1
11) Which of the following is the result of GATT?

A) dramatic growth in world trade
B) slight increase in world trade
C) creation of the EU
D) ITO formation
Answer: A
Diff: 2
Skill: Concept
Objective: 1
12) The GATT rounds focused on decreasing ________.

A) dumping
B) trade tariffs
C) preferential treatment
D) domestic industry subsidies
Answer: B
Diff: 1
Skill: Concept
Objective: 1
13) The ________ requires that any preferential treatment granted to one country must be
extended to all countries.
A) GATT
B) WTO
C) export promotion system
D) most favored nation principle
Answer: D
Diff: 2
Skill: Concept
Objective: 1
14) What countries are granted the most-favored-nation status under the GATT?
A) less-developed nations
B) GATT member countries
C) any country that requests it
D) only members of the WTO
Answer: B
Diff: 2
Skill: Concept
Objective: 1
15) Under GATT, tariffs fell from about ________ in 1948 to about ________ in 2005.
A) 20 percent, 4 percent
B) 28 percent, 5 percent
C) 40 percent, 3 percent
D) 60 percent, 10 percent
Answer: C
Diff: 2
Skill: Concept
Objective: 1
16) The U.S., a GATT member, lowers its tariffs to Country X, a developing country, but
requires the normal tariff for all other countries. The U.S. is most likely using a ________.
A) generalized system of preferences
B) normal trade relations system
C) staggered system of taxation
D) cumulative tariff system
Answer: A
Diff: 2
Skill: Application
Objective: 1
17) Both GATT and the WTO seek to promote ________.
A) trade in goods
B) trade in services
C) intellectual property protection
D) trade-related investment
Answer: A
Diff: 2
Skill: Concept
Objective: 1
18) Country X treats foreign firms the same way it treats domestic firms. Country X most likely
engages in ________.
A) trade balancing
B) national treatment
C) mercantilism
D) foreign treatment
Answer: B
Diff: 2
Skill: Application
Objective: 1
19) What do many labor unions believe to be missing in the WTO's objectives?
A) job security
B) technical training
C) increased service trade
D) foreign agricultural subsidies
Answer: A
Diff: 2
Skill: Concept
Objective: 1
20) A(n) ________ eliminates trade barriers among member countries.

A) free trade area
B) customs union
C) common market
D) economic union
Answer: A
Diff: 1
Skill: Concept
Objective: 2
Learning Outcome: Discuss arguments for and against regional economic integration
21) Parson's Pet Products, an Australian firm, ships many products to Canada. In order to take
advantage of low trade barriers in the U.S., Parson's Pet Products ships its items first to the U.S.
and then reexports the goods to Canada. Parson's Pet Products is most likely using ________.
A) trade circumvention
B) origination manipulation
C) trade deflection
D) external circumvention
Answer: C
Diff: 2
Skill: Application
Objective: 2
22) A(n) ________ combines the elimination of internal trade barriers among member countries
with the adoption of common external trade policies toward nonmembers.
A) free trade area
B) customs union
C) common market
D) economic union
Answer: B
Diff: 1
Skill: Concept
Objective: 2
23) In a(n) ________, members eliminate internal trade barriers, adopt a common external policy
toward nonmembers, and eliminate barriers to the movement of the factors of production.
A) free trade area
B) customs union
C) common market
D) economic union
Answer: C
Diff: 1
Skill: Concept
Objective: 2
24) The integration of the 13 separate colonies operating under separate Articles of
Confederation into a new country, the United States of America, is an example of ________.
A) free trade area
B) customs union
C) common market
D) economic union
E) political union
Answer: D
Diff: 1
Skill: Concept
Objective: 2
25) Country X and Country Z have established a complete political and economic integration.
The countries are most likely engaged in a(n) ________.
A) customs union
B) common market
C) economic union
D) political union
Answer: D
Diff: 2
Skill: Application
Objective: 2
26) A free trade area ________.

A) is complete political and economic integration of two or more countries
B) eliminates trade barriers among member countries
C) allows workers to move freely among trade nations
D) avoids problems stemming from trade deflections
Answer: B
Diff: 2
Skill: Concept
Objective: 2
27) A customs union ________.

B) requires members to eliminate internal trade barriers, adopt a common external policy toward
nonmembers, eliminate barriers to the movement of the factors of production, and coordinate
economic policies
C) requires members to eliminate internal trade barriers, adopt a common external policy toward
nonmembers, and eliminate barriers to the movement of the factors of production
D) involves the elimination of internal trade barriers among member countries and the adoption
of common external trade policies toward nonmembers
Answer: D
Diff: 2
Skill: Concept
Objective: 2
28) A common market ________.
B) requires members to eliminate internal trade barriers, adopt a common external policy toward
nonmembers, eliminate barriers to the movement of the factors of production, and coordinate
economic policies
C) eliminates trade barriers among member countries
D) requires members to eliminate internal trade barriers, adopt a common external policy toward
Answer: D
Diff: 2
Skill: Concept
Objective: 2
29) An economic union ________.

A) requires members to eliminate internal trade barriers, adopt a common external policy toward
nonmembers, abolish restrictions on the movement of the factors of production, and coordinate
economic policies
B) eliminates trade barriers among member countries
Answer: A
Diff: 2
Skill: Concept
Objective: 2
30) A political union ________.

B) eliminates trade barriers among member countries and reduces trade deflection
Answer: A
Diff: 2
Skill: Concept
Objective: 2
31) ________ is an example of a free trade agreement.

A) NAFTA
B) Mercosur
C) European Union
D) APEC
Answer: A
Diff: 1
Skill: Concept
Objective: 2
32) How many countries are part of the European Union?

A) 10
B) 12
C) 20
D) 28
Answer: D
Diff: 2
Skill: Concept
Objective: 3
33) What agreement triggered the establishment of the European Economic Community
A) GATT
B) Treaty of Rome
C) WTO
D) Uruguay Round
Answer: B
Diff: 2
Skill: Concept
Objective: 3
34) Which of the following signed the Treaty of Rome?

A) France
B) East Germany
D) Spain
Answer: A
Diff: 2
Skill: Concept
Objective: 3
35) The 12 member countries became known as the European Union when the ________ was
signed in 1993.
A) Treaty of Rome
B) Treaty of Geneva
C) Genoa Agreement
D) Treaty of Maastricht
Answer: D
Diff: 2
Skill: Concept
Objective: 3
36) Which of the following is a member of the European Union?
A) Kosovo
B) Switzerland
C) Norway
D) Latvia
Answer: D
Diff: 1
Skill: Concept
Objective: 3
37) Which of the following is not an organization that governs the European Union?
A) Council of the European Union
B) European Commission
C) European Trade Council
D) European Court of Justice
Answer: C
Diff: 2
Skill: Concept
Objective: 3
38) Which EU organization is considered the most powerful?

A) Council of the European Union
C) European Parliament
Answer: A
Diff: 2
Skill: Concept
Objective: 3
39) Which round created the WTO?

A) the Uruguay Round
B) the Doha Round
C) the Geneva Round
D) the Tokyo Round
Answer: A
Diff: 2
Skill: Concept
Objective: 1
40) What function is served by the European Commission?
A) executive
B) administrative
C) legislative
D) judicial
Answer: B
Diff: 2
Skill: Concept
Objective: 3
41) The ________ is responsible for proposing legislation, implementing the provisions of the
Treaty of Rome, protecting EU interests in political debates, and administering the EU's
permanent bureaucracy.
A) European Parliament
B) European Court of Justice
C) European Council
D) European Commission
Answer: D
Diff: 2
Skill: Concept
Objective: 3
42) The EU uses a(n) ________ in areas such as health, consumer policy, and free movement of
workers.
A) co-decision procedure
B) unanimous vote
C) qualified majority
D) consensus
Answer: A
Diff: 2
Skill: Concept
Objective: 3
43) What function is performed by the European Court of Justice?

A) administrative
B) executive oversight
C) interpretation of law
D) managerial
Answer: C
Diff: 1
Skill: Concept
Objective: 3
44) How did the EU initially eliminate conflicts among member countries?
A) mandatory arbitration
B) harmonization
C) negotiation
D) legislation
Answer: B
Diff: 1
Skill: Concept
Objective: 3
45) The Cassis de Dijon case brought about the concept of ________ among member nations in
the EU.
A) harmonization
B) arbitration
C) mutual recognition
D) free movement of goods
Answer: C
Diff: 2
Skill: Concept
Objective: 3
46) The ________ concept states that if one EU member state determines that a product is
appropriate for sale, then all other EU members are also obliged to do so under the provisions of
the Treaty of Rome.
A) harmonization
B) arbitration
C) mutual recognition
D) free movement of goods
Answer: C
Diff: 2
Skill: Concept
Objective: 3
47) Which organization is responsible for controlling the Eurozone's money supply, interest
rates, and inflation?
A) European Central Bank
Answer: A
Diff: 2
Skill: Concept
Objective: 3
48) Eurozone participants have agreed to limit their annual government deficits to no more than
________ of their GDPs.
A) 3 percent
B) 5 percent
C) 7 percent
D) 9 percent
Answer: A
Diff: 1
Skill: Concept
Objective: 3
49) The Treaty for Europe is also known as the ________.

A) Treaty of Rome
B) Maastricht Treaty
C) Treaty of Amsterdam
D) Paris Treaty
Answer: C
Diff: 1
Skill: Concept
Objective: 3
50) Which of the following was not a component of the Treaty of Amsterdam?
A) a strong commitment to address high unemployment in the EU
B) a plan to limit the role of the European Parliament
C) termination of a two-track system
D) enforcement of GATT policies
Answer: A
Diff: 2
Skill: Concept
Objective: 3
51) All of the following were elements of the Treaty of Lisbon except ________.
A) permitting the European Commission to increase in size
B) limiting the powers of the European Parliament
C) establishing a full-time President of the European Council
D) prohibiting national legislatures to voice formal concerns about EU laws
Answer: C
Diff: 2
Skill: Concept
Objective: 3
52) Which country listed below remains a non-member of the European Free Trade Association?
A) Denmark
B) Liechtenstein
C) Norway
D) Switzerland
Answer: A
Diff: 1
Skill: Concept
Objective: 4
53) The European Free Trade Association has joined with the ________ to form the European
Economic Area.
A) Mercosur
B) European Union
C) Commonwealth of Independent States
D) Benelux nations
Answer: B
Diff: 2
Skill: Concept
Objective: 4
54) Which of the following is part of NAFTA?

A) Cuba
B) Canada
C) Peru
D) Greenland
Answer: B
Diff: 1
Skill: Concept
Objective: 4
55) What percentage of an automobile must be produced in the United States, Canada, and/or
Mexico in order for it to be considered a North American product?
A) 37 percent
B) 50 percent
C) 62.5 percent
D) 75.5 percent
Answer: C
Diff: 3
Skill: Concept
Objective: 4
56) A ________ is a factory in which little transformation of a product is undertaken.
A) maquiladora
B) screwdriver plant
C) greenfield operation
D) global shipping platform
Answer: B
Diff: 2
Skill: Concept
Objective: 4
57) Which regional trade association includes the Bahamas, Grenada, and Jamaica?
A) ASEAN
B) CARICOM
C) ANCOM
D) ECOWAS
Answer: B
Diff: 2
Skill: Concept
Objective: 4
58) Which country initiated the Caribbean Basin Initiative?

A) Venezuela
C) the Caribbean islands
D) Bermuda
Answer: B
Diff: 3
Skill: Concept
Objective: 4
59) Which of the following countries is part of the Mercosur Accord?

A) Argentina
B) Guatemala
C) Columbia
D) Mexico
Answer: A
Diff: 2
Skill: Concept
Objective: 4
60) The ________ promotes free trade among Bolivia, Chile, Colombia, Ecuador, and Peru.
A) Mercosur Accord
B) Andean Community
C) Central America Common Market
D) Southern Cone Customs Union
Answer: B
Diff: 2
Skill: Concept
Objective: 4
61) The ________ is an agreement to create a customs union among the governments of
Argentina, Brazil, Paraguay, and Uruguay.
A) Mercosur Accord
B) ASEAN Free Trade Area
C) Andean Pact
D) Central America Common Market
Answer: A
Diff: 2
Skill: Concept
Objective: 4
62) Ernest, a federal government employee, attended a session of the final GATT Round. Ernest
attended the ________ Round.
A) Kennedy
B) Uruguay
C) Geneva
D) Tokyo
Answer: B
Diff: 2
Skill: Application
Objective: 1
63) Which GATT Round led to the creation of the WTO?

A) Doha
B) Geneva
C) Uruguay
D) Kennedy
Answer: C
Diff: 2
Skill: Concept
Objective: 1
64) As a participant at the Doha Round, you would experience the most negotiation difficulties
in the area of ________.
A) agricultural goods
B) tariff reductions
C) foreign exchange
D) service trade
Answer: A
Diff: 2
Skill: Application
Objective: 1
65) Salvo Software develops computer games and business software systems that are popular
throughout the world. Like many software firms, Salvo has experienced problems with illegal
counterfeiting of its products. Given this concern, which of the following would be of most
interest to Salvo?
A) TRIMS
B) BARS
C) TRIPS
D) GATS
Answer: C
Diff: 2
Skill: Application
Objective: 1
66) Country X wants to encourage trade by eliminating trade barriers with the three countries
along its borders. However, Country X wants each of the countries to be able to establish their
own trade policies even though this may lead to problems with trade deflection. Which form of
economic integration is Country X most likely considering?
A) economic union
B) common market
C) customs union
D) free trade area
Answer: D
Diff: 2
Skill: Application
Objective: 2
67) A ________ is the third step along the path to total economic integration.
A) commercial market
B) economic union
C) customs union
D) free trade area
Answer: A
Diff: 2
Skill: Application
Objective: 2
68) CVR Enterprises is based in the EU country that has the greatest number of votes in
Parliament. CVR Enterprises is most likely a ________ firm.
A) German
B) French
C) British
D) Italian
Answer: A
Diff: 2
Skill: Application
Objective: 3
69) Natalie is employed by the governing organization of the EU that is responsible for
proposing legislation, administering the EU's permanent bureaucracy, and implementing the
provisions of the Treaty of Rome. Natalie most likely works for the ________.
A) European Court of Justice
D) Council of the European Union
Answer: B
Diff: 2
Skill: Application
Objective: 3
70) Executives at TVR Enterprises, an MNE based in Germany, feel threatened by a pending EU
regulation that will require the MNE to reduce its production capacity. Which of the following
actions is the most appropriate for TVR?
A) complying with the EU's mutual recognition laws
B) apply for a harmonization regulation with the EU
C) appealing to the European Court of Justice
D) lobbying the European Commission
Answer: D
Diff: 3
Skill: Application
Objective: 3
Chapter 11 International Strategic Management
1) ________ is a comprehensive and ongoing management planning process aimed at

formulating and implementing strategies that enable a firm to compete effectively
internationally.
A) International strategic management
B) International operations strategy
C) Multinational flexibility
D) Global management
Answer: A
Diff: 1
Skill: Concept
Objective: 1
2) ________ is the process of developing a particular international strategy.

A) Strategic planning
B) Global management
C) Multinational flexibility
D) International strategic management
Answer: A
Diff: 1
Skill: Concept
Objective: 1
Learning Outcome: Describe the process of selecting and developing an international business
strategy
3) Which of the following would be the most involved with strategic planning at Olson
Pharmaceuticals, an MNE?
A) Aaron, a top-level executive
B) Brenda, a middle manager
C) Carl, an operational manager
D) Debra, a functional executive
Answer: A
Diff: 2
Skill: Application
Objective: 1
4) ________ are comprehensive frameworks for achieving a firm's fundamental goals.
A) Strategic business units
B) International strategies
C) Competitive goals
D) International operational plans
Answer: B
Diff: 2
Skill: Concept
Objective: 1
strategy
5) Garmin Footwear, an MNE, establishes facilities anywhere in the world that yields the lowest
production or distribution costs. Garmin most likely benefits from ________.
A) multinational flexibility
B) economies of scale
C) location efficiencies
D) economies of scope
Answer: C
Diff: 2
Skill: Application
Objective: 1
strategy
6) JBX Automobiles, a global firm, builds factories to serve more than one country and lower the
MNE's production costs. JBX Automobiles most likely benefits from ________.
Answer: B
Diff: 2
Skill: Application
Objective: 1
strategy
7) What form of efficiency did Mercedes-Benz capture by initially producing its sport utility
vehicle only in Alabama?
Answer: B
Diff: 2
Skill: Concept
Objective: 1
8) Carvel Industries, an MNE, broadens its product line in each of the countries that it enters.
Carvel most likely benefits from ________.
Answer: D
Diff: 2
Skill: Application
Objective: 1
strategy
9) ________ occur(s) when firms build factories that serve more than one country and lower
their production costs.
A) Multinational flexibility
B) Economies of scale
C) Location efficiencies
D) Economies of scope
Answer: B
Diff: 1
Skill: Concept
Objective: 1
10) Nike achieved ________ by centering its manufacturing in countries where labor costs are
relatively low.
Answer: C
Diff: 2
Skill: Concept
Objective: 1
11) Martin Enterprises, an MNE with operations in India, Japan, and Taiwan, has decided to
delegate an increasing amount of responsibility to the managers of its local subsidiaries. Which
of the following will most likely be enhanced as a result?
Answer: A
Diff: 2
Skill: Application
Objective: 1
12) Which of the following would most likely be minimized if too much power was centralized
in one unit of the firm?
A) worldwide learning
Answer: A
Diff: 2
Skill: Concept
Objective: 1
13) A global firm's worldwide learning may be increased by ________.

A) economies of scope and scale
B) diverse operating environments
C) similar domestic experiences
D) stringent selection practices
Answer: B
Diff: 2
Skill: Concept
Objective: 1
14) Multinational flexibility is ________.

A) higher when strategy is centralized
B) higher when R&D is concentrated at the headquarters
C) greater when marketing programs develop domestically
D) enhanced when responsibility is delegated to subsidiaries
Answer: D
Diff: 2
Skill: Concept
Objective: 1
15) When using a(n) ________, a firm utilizes the core competency or firm-specific advantage it
developed in the domestic market as its main competitive weapon in the foreign markets it
enters.
A) multidomestic strategy
B) home replication strategy
C) transnational strategy
D) international strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 2
strategy
16) With the home replication strategy ________.
A) the firm utilizes the core competency of the firm or firm-specific advantage it developed in
domestic markets as its main competitive weapon in the foreign market it enters
B) the firm views itself as a collection of relatively independent operating subsidiaries
C) the firm views the world as a single marketplace and has as its primary goal the creation of
standardized goods and services that will address the needs of customers worldwide
D) the firm assigns responsibility for various organizational tasks to the unit of the organization
best able to achieve the dual goals of efficiency and flexibility
Answer: A
Diff: 2
Skill: Concept
Objective: 2
strategy
17) Mercedes-Benz relies on its brand name and reputation for well-engineered, luxurious cars to
succeed in foreign markets. Mercedes-Benz is most likely using the ________ strategy.
A) multidomestic
B) home replication
C) transnational
D) global
Answer: B
Diff: 2
Skill: Application
Objective: 2
18) Parker Sportswear is an MNE with retail stores around the world. Parker views itself as a
collection of relatively independent operating subsidiaries, each of which focuses on a specific
domestic market. Parker most likely uses a ________ strategy.
A) multidomestic
B) home replication
C) transnational
D) global
Answer: A
Diff: 2
Skill: Application
Objective: 2
strategy
19) With the multidomestic strategy ________.
A) the firm utilizes the core competency of the firm or firm-specific advantage it developed at
home as its main competitive weapon in the foreign market it enters
Answer: B
Diff: 2
Skill: Concept
Objective: 2
strategy
20) Hanson Manufacturing, an MNE, has operations in India, Taiwan, China, and Argentina.
Since Hanson focuses on the specific domestic market in each location, the firm allows its
subsidiaries to customize products and develop marketing campaigns that will appeal to local
customers. Hanson most likely uses a ________ strategy.
A) multidomestic
B) home replication
C) transnational
D) global
Answer: A
Diff: 2
Skill: Application
Objective: 2
strategy
21) Which approach is most appropriate when economies of scale for production, distribution,
and marketing are low?
D) global strategy
Answer: A
Diff: 2
Skill: Concept
Objective: 2
strategy
22) Executives at Harper Industries are evaluating the firm's international strategy to determine if
the current approach is effective. Harper has been using a multidomestic strategy for the last five
years. Which of the following statements best supports Harper continuing to use the same
strategy?
A) Few differences exist between national markets.
B) Central headquarters makes most decisions.
C) Economies of scale for production are low.
D) Products are marketed to global consumers.
Answer: C
Diff: 3
Objective: 2
strategy
23) With the global strategy ________.

Answer: C
Diff: 2
Skill: Concept
Objective: 2
strategy
24) A firm following the ________ views the world as a single marketplace.
D) global strategy
Answer: D
Diff: 2
Skill: Concept
Objective: 2
strategy
25) The primary goal of a(n) ________ is the creation of standardized goods and services that
will address the needs of customers worldwide.
D) global strategy
Answer: D
Diff: 2
Skill: Concept
Objective: 2
strategy
26) Dixon Enterprises, an MNE, uses a global strategy, which means that the firm most likely
has a ________ structure.
A) decentralized
B) centralized
C) geographic
D) market
Answer: B
Diff: 2
Skill: Application
Objective: 2
27) Firms using a ________ conduct business the same way anywhere in the world.
A) multi-market strategy
B) transnational strategy
C) global strategy
D) multidomestic strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
28) Which strategy combines the benefits of global scale efficiencies and local responsiveness?
D) global strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
strategy
29) With the transnational strategy ________.
Answer: D
Diff: 2
Skill: Concept
Objective: 2
strategy
30) IKEA attempts to capture global efficiencies while remaining responsive to local conditions.
IKEA follows a ________.
D) global strategy
Answer: C
Diff: 2
Skill: Application
Objective: 2
31) Firms using a ________ are more likely to locate responsibility for one product line in one
country and responsibility for a second product line in another.
D) global strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
32) Abelman Home Goods, an MNE, faces significant pressure to respond to local conditions but
very little pressure to integrate globally. Which strategy would most likely be best for Abelman?
A) home replication strategy
C) global strategy
Answer: D
Diff: 2
Skill: Application
Objective: 2
strategy
33) Kraft Foods is more concerned with meeting the specific needs of local customers than with
reducing manufacturing costs. Which strategy is most likely used by Kraft Foods?
C) global strategy
Answer: D
Diff: 2
Skill: Application
Objective: 2
strategy
34) Sargent Software faces significant pressure to move towards global integration , but the
MNE does not need to respond locally. Which strategy should most likely be used by Sargent
Software?
C) global strategy
Answer: C
Diff: 2
Skill: Application
Objective: 2
strategy
35) Sony designs its products with an international market in mind, so the firm most likely uses a
________.
C) global strategy
Answer: C
Diff: 2
Skill: Application
Objective: 2
strategy
36) When pressures for global integration and local responsiveness are both high, firms usually
adopt the ________.
C) global strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 2
37) Which of the following situations does not indicate a low need for global integration?
A) differentiated products
B) weak brand name
C) after-sales support services
D) quality differences
Answer: B
Diff: 2
Skill: Concept
Objective: 2
strategy
38) ________ require(s) the transfer of information and experiences from the parent to each
subsidiary, from each subsidiary to the parent, and among subsidiaries.
A) Global efficiencies
B) Economies of scope
C) Worldwide learning
D) Transnational strategies
Answer: C
Diff: 1
Skill: Concept
Objective: 2
39) Which strategy is likely the best for promoting global learning?
D) global strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
40) A firm using a ________ strategy would most likely have a matrix structure, project teams,
and informal management networks to transfer knowledge among subsidiaries.
D) global strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
41) Which of the following is one of the components of strategy development?

A) distinctive competence
B) differential advantage
C) scope of operations
D) economies of scale
Answer: C
Diff: 2
Skill: Concept
Objective: 3
strategy
42) ________ answers the question, "What do we do exceptionally well, especially as compared
to our competitors?"
A) Distinctive competence
B) Differential advantage
C) Scope of operations
D) Resource deployment
Answer: A
Diff: 3
Skill: Concept
Objective: 3
strategy
43) Sony has cutting edge technology, efficient distribution networks, and superior
organizational practices. These characteristics are most relevant to which component of
international strategy?
B) scope of operations
C) resource deployment
D) synergy
Answer: A
Diff: 2
Skill: Application
Objective: 3
44) Disney's name, image, and portfolio of characters are examples of which component of
international strategy?
D) synergy
Answer: A
Diff: 2
Skill: Application
Objective: 3
45) ________ answers the question, "Where are we going to conduct business?"
B) Scope of operations
C) Resource deployment
D) Synergy
Answer: B
Diff: 2
Skill: Concept
Objective: 3
strategy
46) The compatibility of software programs with the Windows operating system is an example of
Microsoft's ________.
B) differential advantage
C) scope of operations
D) synergy
Answer: A
Diff: 2
Skill: Application
Objective: 3
47) ________ may be defined in terms of geographic regions, markets, or product niches.
D) Synergy
Answer: B
Diff: 2
Skill: Concept
Objective: 3
48) Disney has constructed theme parks in Japan, the United States, and France. This refers to
Disney's ________.
D) synergy
Answer: B
Diff: 2
Skill: Application
Objective: 3
49) ________ answers the question, "Given that we are going to compete in these markets, how
will we allocate our resources to them?"
D) Synergy
Answer: C
Diff: 2
Skill: Concept
Objective: 3
strategy
50) When Disney decides to make a low investment in its Tokyo park, a higher investment in
Disneyland Paris, and a similar investment in Hong Kong's theme park, Disney is modifying
which component of international strategy?
D) synergy
Answer: C
Diff: 2
Skill: Application
Objective: 3
51) Although Daimler AG's newest plant is in Alabama, most Mercedes are still German built.
This is an example of Daimler AG's ________.
D) synergy
Answer: C
Diff: 2
Skill: Application
Objective: 3
52) ________ answers the question, "How can different elements of our business benefit each
other?"
D) Synergy
Answer: D
Diff: 2
Skill: Concept
Objective: 3
strategy
53) The goal of ________ is to create a situation where the whole is greater than the sum of the
parts.
D) synergy
Answer: D
Diff: 1
Skill: Concept
Objective: 3
54) Disney's ________ is evident in the fact that people recognize its characters from television
and movies, visit Disney theme parks, and buy merchandise featuring the Disney characters.
D) synergy
Answer: D
Diff: 2
Skill: Application
Objective: 3
55) When managers develop, refine, and agree on which markets to enter or exit and how to best
compete in each, the managers are engaged in the strategy ________ process.
A) development
B) formulation
C) implementation
D) evaluation
Answer: B
Diff: 1
Skill: Concept
Objective: 4
strategy
56) In ________, the firm develops the tactics for achieving the formulated international
strategies.
A) strategy development
B) strategy formulation
C) strategy implementation
D) strategy evaluation
Answer: C
Diff: 1
Skill: Concept
Objective: 4
strategy
57) The first step in the strategic planning process is to ________.

A) perform a SWOT analysis
B) develop a mission statement
C) establish strategic goals
D) develop a control framework
Answer: B
Diff: 2
Skill: Concept
Objective: 4
strategy
58) Which of the following clarifies the organization's purpose, values, and direction?
A) code of ethics
B) SWOT analysis
C) strategic plan
D) mission statement
Answer: D
Diff: 1
Skill: Concept
Objective: 4
59) Which of the following would most likely be initiated through an environmental scan?
A) BCG matrix
B) diversification
C) SWOT analysis
D) strategic formulation
Answer: C
Diff: 1
Skill: Concept
Objective: 4
strategy
60) A(n) ________ is a systematic collection of data about all elements of the firm's external and
internal environments.
A) environmental scan
B) strategic analysis
C) strategic formulation
D) situation analysis
Answer: A
Diff: 2
Skill: Concept
Objective: 4
strategy
61) Which term was developed by Michael Porter to describe the firm's important activities, such
as production, marketing, and HR management?
A) control framework
C) supply network
D) value chain
Answer: D
Diff: 1
Skill: Concept
Objective: 4
62) Which term refers to the major objectives that a firm wants to accomplish through pursuing a
specific course of action?
A) tactics
B) value chains
C) strategic goals
D) control frameworks
Answer: C
Diff: 1
Skill: Concept
Objective: 4
63) What is the final step of formulating an international business strategy?
A) developing a control framework
B) conducting an environmental scan
C) specifying tactical goals and plans
D) identifying relevant value chain activities
Answer: A
Diff: 2
Skill: Concept
Objective: 4
strategy
64) A(n) ________ calls for a firm to rely on a single business, product, or service for all its
revenue.
A) corporate strategy
B) single-business strategy
C) related diversification strategy
D) unrelated diversification strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 5
strategy
65) A(n) ________ calls for the firm to operate in several different but fundamentally related
businesses, industries, or markets at the same time.
Answer: C
Diff: 2
Skill: Concept
Objective: 5
strategy
66) Firms using a(n) ________ operate in several unrelated industries and markets.
Answer: D
Diff: 2
Skill: Concept
Objective: 5
strategy
67) Which strategy attempts to establish and maintain the image that an SBU's product or
services are fundamentally unique from other products or services in the same market segment?
B) differentiation strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 5
strategy
68) Which strategy calls for a firm to focus on achieving highly efficient operating procedures so
that its costs are lower than its competitors?
A) focus strategy
C) overall cost leadership strategy
Answer: C
Diff: 1
Skill: Concept
Objective: 5
strategy
69) Which strategy calls for a firm to target specific types of products for certain customer
groups or regions?
A) focus strategy
Answer: A
Diff: 2
Skill: Concept
Objective: 5
strategy
Chapter 12 Strategies for Analyzing and Entering Foreign Markets
1) Which of the following is not one of the three steps in increasing market share, revenue, and
profits?
A) assess alternative markets
B) evaluate respective costs, benefits, and risks
C) perform a situation analysis
D) select market with most potential for entry or expansion
Answer: C
Diff: 2
Skill: Concept
Objective: 1
2) What is the first step in selecting a foreign market?

A) assessing market potential
B) monitoring major markets
C) evaluating host country's trade policies
D) assessing general legal and political environments
Answer: A
Diff: 2
Skill: Concept
Objective: 1
3) Which of the following is the least effective indicator of a country's potential for economic
growth?
A) GDP
B) per capita income
C) energy consumption
D) television viewing patterns
Answer: D
Diff: 1
Skill: Concept
Objective: 2
4) ________ refer to expenses incurred by the firm as it enters a new foreign market.
A) Indirect costs
B) Direct costs
C) Opportunity costs
D) Variable costs
Answer: B
Diff: 1
Skill: Concept
Objective: 1
5) Gameware recently entered the German market. Gameware executives also wanted to enter
the Canadian market but had to delay the entry because of limited resources. What type of costs
will Gameware incur as a result of being unable to enter the Canadian market?
A) indirect costs
B) direct costs
C) opportunity costs
D) variable costs
Answer: C
Diff: 2
Skill: Application
Objective: 1
6) Gameware recently entered the German market. Gameware incurred significant costs
associated with setting up a business operation in Frankfurt, transferring managers to Germany,
and shipping equipment to the German facility. Gameware's expenses are best described as
________.
B) setup costs
C) direct costs
D) indirect costs
Answer: C
Diff: 2
Skill: Application
Objective: 1
7) Which of the following are potential benefits of entering a new market?

A) eliminating synergy with other operations
B) increasing manufacturing costs
C) limiting competitors' profits
D) logistical complexities
Answer: C
Diff: 2
Skill: Concept
Objective: 1
8) Which theory listed below is useful in deciding which mode of entry to use when entering
foreign markets?
A) ownership advantage theory
C) eclectic theory
Answer: C
Diff: 2
Skill: Concept
Objective: 2
9) The informational, political, and cultural disadvantages that foreign firms face when trying to
compete against local firms in the host country market are referred to as ________.
B) liability of foreignness
C) internalization disadvantages
D) the burden of internationalization
Answer: B
Diff: 1
Skill: Concept
Objective: 2
10) Which of the following is the most intensive mode of entry into foreign markets?
A) exporting
B) importing
C) international licensing
D) FDI
Answer: D
Diff: 1
Skill: Concept
Objective: 2
Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter
into foreign markets
11) ________ are tangible or intangible resources owned by a firm which grant it a competitive
advantage over its industry rivals.
A) Ownership advantages
B) Location advantages
C) Internalization advantages
D) Competitive advantages
Answer: A
Diff: 1
Skill: Concept
Objective: 2
12) ________ are those factors that affect the desirability of host country production relative to
home country production.
B) Location advantages
C) National competitive advantages
D) Internalization advantages
Answer: B
Diff: 1
Skill: Concept
Objective: 2
13) ________ are those factors that make it desirable for a firm to produce a good or service
itself rather than contracting with another firm to produce it.
B) National competitive advantages
C) Internalization advantages
D) Resource availabilities
Answer: C
Diff: 1
Skill: Concept
Objective: 2
14) Toyota's efficient manufacturing techniques and reputation for producing high-quality
automobiles are examples of ________.
A) location advantages
B) ownership advantages
C) internalization advantages
D) internationalization advantages
Answer: B
Diff: 2
Skill: Application
Objective: 2
15) Delvin Pharmaceuticals, a U.S. firm, is considering the idea of entering the Japanese market.
Which entry mode will Delvin most likely use?
A) exporting
B) licensing
C) turnkey
D) franchising
Answer: B
Diff: 2
Skill: Application
Objective: 2
16) ________ is the most common form of international business activity.

A) Exporting
B) Licensing
C) Greenfield strategy
D) Management contract
Answer: A
Diff: 2
Skill: Concept
Objective: 3
business
17) Which of the following is a characteristic of exporting?
A) high financial exposure
B) rapid market entry
C) logistical simplicity
D) local market knowledge
Answer: D
Diff: 2
Skill: Concept
Objective: 3
business
18) ________ are those that pull a firm into foreign markets as a result of opportunities available
there.
A) Reactive motivations
B) Proactive motivations
C) Opportunity motivations
D) Avoidance motivations
Answer: B
Diff: 1
Skill: Concept
Objective: 3
19) ________ for exporting are those that push a firm into foreign markets.
A) Reactive motivations
B) Proactive motivations
C) Opportunity motivations
D) Avoidance motivations
Answer: A
Diff: 1
Skill: Concept
Objective: 3
20) Which of the following is an advantage of exporting?

A) vulnerability to tariffs
B) logistical complexities
C) potential conflicts with distributors
D) access to new markets
Answer: D
Diff: 2
Skill: Concept
Objective: 3
21) Which mode of entry has the most potential to create a future competitor?
A) licensing
B) exporting
C) turnkey project
D) contract manufacturing
Answer: A
Diff: 2
Skill: Concept
Objective: 4
22) Which of the following is a characteristic of foreign direct investment?

A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management
Answer: C
Diff: 2
Skill: Concept
Objective: 7
country
23) Franklin Carpets engages in indirect exporting, so the firm sells its carpets to a(n) ________.
A) domestic customer who then sells the carpets to a foreign customer
B) foreign customer who then sells the carpets to a domestic customer
C) affiliated company located in a foreign country
D) foreign customer through e-commerce
Answer: A
Diff: 2
Skill: Application
Objective: 3
24) ________ occur(s) when a firm sells its products to a domestic customer, which in turn
exports the product, in either its original form or a modified form.
A) Indirect exporting
B) Direct exporting
C) Intercorporate transfers
D) Intracorporate transfers
Answer: A
Diff: 2
Skill: Concept
Objective: 3
25) When Hewlett-Packard buys microchips from Intel to use in manufacturing computers and
then exports the completed computers to Europe, ________ has occurred.
A) indirect exporting of Intel's chips
B) direct exporting of Intel's chips
C) an intercorporate transfer of Intel's chips
D) an intracorporate transfer of Intel's chips
Answer: A
Diff: 2
Skill: Application
Objective: 3
26) Which term refers to sales made to either distributors or end-users located outside the firm's
home country?
A) indirect exporting
B) direct exporting
C) intercorporate transfers
D) intracorporate transfers
Answer: B
Diff: 1
Skill: Concept
Objective: 3
27) Which term refers to the sale of goods by a firm in one country to an affiliated firm in
another country?
B) direct exporting
Answer: D
Diff: 1
Skill: Concept
Objective: 3
28) When British Petroleum ships crude oil from its storage facilities in Kuwait to its Australian
subsidiary, ________ has occurred.
B) direct exporting
C) an intracorporate transfer
D) an intercorporate transfer
Answer: C
Diff: 2
Skill: Application
Objective: 3
29) Which form of exporting is used by firms in order to lower their production costs?
B) direct exporting
Answer: D
Diff: 2
Skill: Concept
Objective: 3
30) Which of the following would most likely discourage an international firm from relying on
exports as an entry mode?
A) tariffs
B) export promotion policies
C) export financing programs
D) home country subsidization
Answer: A
Diff: 2
Skill: Concept
Objective: 3
31) What are the third parties that specialize in facilitating imports and exports called?
A) intermediaries
B) wholesalers
C) exporters
D) distributors
Answer: A
Diff: 2
Skill: Concept
Objective: 3
32) ________ offer services including export management companies, Webb-Pomerene

associations, and international trading companies.
A) Intermediaries
B) Wholesalers
C) Exporters
D) Distributors
Answer: A
Diff: 2
Skill: Concept
Objective: 3
33) A(n) ________ is a firm that acts as its client's export department.
A) Webb-Pomerene association
B) Greenfield organization
C) export management company
D) international trading company
Answer: C
Diff: 1
Skill: Concept
Objective: 3
34) Tanya is employed by an export management company that provides its services to many
exporters in the Chicago area. Tanya would likely be responsible for ________.
A) shipping goods
B) advertising
C) creating strategic marketing plans
D) customer service
Answer: A
Diff: 2
Skill: Concept
Objective: 3
35) Wine consumption in China has been at an annual growth rate of ________.
A) 2%
B) 20%
C) 200%
D) 2,000%
Answer: B
Diff: 2
Skill: Concept
Objective: 2
36) A(n) ________ is a group of U.S. firms that operate within the same industry and are
allowed by law to coordinate their export activities without fear of violating U.S. antitrust laws.
B) Greenfield organization
C) export management company
D) international trading company
Answer: A
Diff: 1
Skill: Concept
Objective: 3
37) Which of the following statements about Webb-Pomerene associations is most likely true?
A) The number of Webb-Pomerene associations is growing due to globalization.
B) Most Webb-Pomerene associations facilitate trade in the garment industry.
C) Webb-Pomerene associations participate in marketing and promotion.
D) Webb-Pomerene associations are unable to negotiate contracts.
Answer: C
Diff: 3
Skill: Concept
Objective: 3
38) A(n) ________ is a firm directly engaged in importing and exporting a wide variety of goods
for its own account.
B) export management company
C) international trading company
D) management broker
Answer: C
Diff: 1
Skill: Concept
Objective: 3
39) Unlike an export management company, an international trading company ________.
A) offers customer financing
B) facilitates customs documentation
C) manages international transportation logistics
D) participates in exporting and importing activities
Answer: D
Diff: 3
Skill: Concept
Objective: 3
40) Where are the world's most important international trading companies located?
A) Germany
B) Japan
C) Canada
D) China
Answer: B
Diff: 1
Skill: Concept
Objective: 3
41) A sogo shosha is best described as a(n) ________.

A) export management company
B) freight forwarder
C) international trading company
D) manufacturers' agent
Answer: C
Diff: 2
Skill: Concept
Objective: 3
42) Which of the following best explains the success of the sogo shosha?
A) access to information about global economic conditions
B) ability to generate e-commerce profits and sales
C) support from local and foreign governments
D) acquisition of intellectual property rights
Answer: A
Diff: 3
Skill: Concept
Objective: 3
business
43) Which of the following solicits domestic orders for foreign manufacturers on a commission
basis?
A) manufacturers' agent
B) export and import broker
C) freight forwarder
D) manufacturers' export agent
Answer: A
Diff: 1
Skill: Concept
Objective: 3
44) The ________ acts as a foreign sales department for domestic producers by selling those
firms' goods in foreign markets.
Answer: D
Diff: 1
Skill: Concept
Objective: 3
45) ________ can bring together international buyers and sellers of standardized commodities
like coffee and grains.
A) A manufacturers' agent
B) An export and import broker
C) A freight forwarder
D) A sogo shosha
Answer: B
Diff: 1
Skill: Concept
Objective: 3
46) BTV Enterprises specializes in the physical transportation of goods for its clients by
arranging customs documentation and obtaining transportation services. BTV Enterprises is most
likely a(n) ________.
Answer: C
Diff: 2
Skill: Application
Objective: 3
47) The Mitsubishi Corporation is a firm that is directly engaged in importing and exporting a
wide variety of goods for its own account and is a part of a keiretsu system. What type of export
intermediary is it?
A) export management company
B) sogo shosha
D) export and import broker
Answer: B
Diff: 2
Skill: Application
Objective: 3
48) The Nintendo Company manufactures electronic video consoles and game cartridges.
Nintendo provides game design firms with technical specifications for how Nintendo consoles
function. The game design firms create the games and then pay Nintendo a fee to manufacture
those games. What mode of entry is described in this example?
A) exporting
B) franchising
C) licensing
D) joint venture
Answer: C
Diff: 2
Skill: Application
Objective: 4
49) The firm that leases the right to use intellectual property is called the ________.
A) leasor
B) licensor
C) licensee
D) franchisee
Answer: B
Diff: 1
Skill: Concept
Objective: 4
50) Research suggests that in ________ of cases, a firm's initial direct exporting to a foreign
market is the result of unsolicited orders.
A) one-tenth
B) one-quarter
C) one-third
D) one-half
Answer: C
Diff: 2
Skill: Concept
Objective: 2
51) Sub-Saharan Africa accounts for ________ of world GDP.

A) 2%
B) 12%
C) 20%
D) 32%
Answer: A
Diff: 1
Skill: Concept
Objective: 1
52) Which term refers to compensation under a licensing agreement?

A) sales commission
B) fixed amount
C) sales percentage
D) royalty
Answer: D
Diff: 1
Skill: Concept
Objective: 4
53) Vinson Bicycles, a U.S. firm, is considering the idea of entering the EU market through an
international licensing agreement. What is the main disadvantage of this entry method for
Vinson?
A) significant financial and political risks
B) foreign investment restrictions
C) limited market opportunities
D) high tariff costs
Answer: C
Diff: 2
Skill: Application
Objective: 4
54) Carmichael Candies, a U.S. firm, is considering the idea of entering the EU market through
an international franchising agreement. What is the main advantage to Carmichael if the firm
chooses this entry method?
A) avoidance of tariffs
B) independence from franchisee
C) potential public relations problems
D) high managerial and financial risks
Answer: A
Diff: 2
Skill: Application
Objective: 5
55) In comparison to licensing, franchising offers a firm ________.

A) less taxation
B) more control
C) higher profit margins
D) fewer financial risks
Answer: B
Diff: 2
Skill: Synthesis
Objective: 4, 5
56) International franchising is most likely to succeed when the franchisor has ________.
A) specialized machinery
B) exported other products
C) succeeded in the domestic market
D) implemented a diversification strategy
Answer: C
Diff: 2
Skill: Concept
Objective: 5
57) Kodak focuses on developing photo editing software, and the firm has agreements with a
Chinese manufacturer to assemble most Kodak cameras. Which entry mode for international
business is used by Kodak?
A) management contracting
B) international franchising
C) contract manufacturing
D) international licensing
Answer: C
Diff: 2
Skill: Application
Objective: 6
58) British Airways has an arrangement with a state-owned airline headquartered in Brazil.
British Airways provides the Brazilian airline with advice on reservation services and
scheduling. Which entry mode for international business is used by British Airways?
A) management contract
B) turnkey project
C) greenfield strategy
D) licensing
Answer: A
Diff: 2
Skill: Application
Objective: 6
59) Bechtel, a construction and engineering firm, has a contract with the Indian government to
expand the airport in New Delhi. Bechtel will design, construct, and equip the airport before
turning the facility over to the Indian government upon completion. Which entry mode for
international business is used by Bechtel?
A) B-O-T project
B) turnkey project
C) contract manufacturing
Answer: B
Diff: 2
Skill: Application
Objective: 6
60) Which of the following is typically critical to a turnkey project?
A) business processes
B) low-wage labor force
C) environmental regulations
D) home government financing
Answer: D
Diff: 2
Skill: Concept
Objective: 6
61) Which term refers to a firm building and operating a facility before transferring ownership of
the facility to another party?
A) FDI
B) B-O-T project
C) turnkey project
D) greenfield strategy
Answer: B
Diff: 2
Skill: Concept
Objective: 6
62) Which country is the market leader in providing international business process outsourcing?
A) South Africa
B) Brazil
C) India
D) China
Answer: C
Diff: 2
Skill: Concept
Objective: 6
63) Juanita recently purchased a FDX Computer. She needs assistance setting it up and contacts
the firm's customer service center, which is located in Bangalore, India. FDX Computer most
likely engages in which of the following?
A) business process outsourcing
B) foreign direct investment
C) brownfield strategies
D) B-O-T projects
Answer: A
Diff: 2
Skill: Application
Objective: 6
64) Which of the following is a method for foreign direct investment?
A) participating in business process outsourcing
B) buying existing assets in a foreign country
C) exporting services and products
D) entering licensing agreements
Answer: B
Diff: 2
Skill: Concept
Objective: 7
65) Comtex, a U.S. clock manufacturer, recently built a new production facility in Bangladesh.
Which term best describes the activities of Comtex?
A) joint venture strategy
B) brownfield strategy
C) acquisition strategy
Answer: D
Diff: 2
Skill: Application
Objective: 7
66) What is a common disadvantage of using a greenfield strategy?

A) paying high tariffs
B) using outdated equipment
C) taking over existing debts
D) complying with local regulations
Answer: D
Diff: 2
Skill: Concept
Objective: 7
country
67) The licensees that built Tokyo Disneyland insisted on a ________ licensing agreement with
the Walt Disney Company before agreeing to invest the funds necessary to build the park.
A) one-year
B) ten-year
C) twenty-five year
D) one-hundred year
Answer: D
Diff: 2
Skill: Application
Objective: 3
68) When two or more firms agree to work together and create a joint owned firm to promote
mutual interest, ________ has occurred.
A) an acquisition
B) a joint venture
C) a licensing agreement
D) a franchise agreement
Answer: B
Diff: 1
Skill: Concept
Objective: 7
Chapter 13 International Strategic Alliances
1) How was General Mills able to gain 25% of the European cereal market?
A) selling organic products
B) sharing facilities with Kellogg
C) marketing its products online
D) forming a joint venture with Nestle
Answer: D
Diff: 2
Skill: Concept
Objective: 1
2) Company X and Company Z have established a business arrangement whereby the two firms
will cooperate for their mutual benefit. Which of the following has most likely been established?
A) competitive advantage
C) franchising arrangement
D) strategic alliance
Answer: D
Diff: 2
Skill: Application
Objective: 1
3) A ________ is a special type of strategic alliance in which two or more firms join together to
create a new business entity that is legally separate and distinct from its parents.
A) joint venture
C) franchising arrangement
Answer: A
Diff: 2
Skill: Concept
Objective: 1
4) Nestle and General Mills created Cereal Partners Worldwide to compete effectively in the
European market. Cereal Partners Worldwide is owned equally by the two firms, so CPW is an
example of a(n) ________.
A) franchising arrangement
B) acquisition strategy
C) joint venture
D) FDI
Answer: C
Diff: 2
Skill: Application
Objective: 1
5) Cross-licensing of proprietary technology, sharing of production facilities, cofounding

research projects, and the marketing of each other's products using existing distribution networks
is known as ________.
A) a joint venture
B) a merger
C) an acquisition
D) a strategic alliance
Answer: D
Diff: 1
Skill: Application
Objective: 2
6) What is the primary difference between a joint venture and a non-joint venture strategic
alliance?
A) level of political, cultural and financial risk for each firm
B) formation of a third, legally separate business entity
C) amount of financial investment required
D) geographic location of the alliance
Answer: B
Diff: 3
Skill: Concept
Objective: 1
7) Advanced Audio and EQ Electronics recently established a joint venture for the purpose of
cooperating in the design, production, and sale of a line of audio equipment. Executives at the
two firms must now decide the best way to manage the joint venture. Which of the following
choices would defeat the purpose of the joint venture?
A) hiring an independent management team
B) jointly sharing management responsibilities
C) assigning one firm all management responsibilities
D) continuing completely separate management activities
Answer: D
Diff: 2
Skill: Application
Objective: 1
8) Furman Furnishings wants to expand its international operations in cooperation with another
firm. Which of the following methods would be most appropriate for Furman?
A) exporting
B) licensing
C) joint venture
Answer: C
Diff: 2
Skill: Application
Objective: 1
9) Feldman Insurance wants to enter the Brazilian market but is concerned about hostile
government regulations in Brazil. Which of the following would most likely help Feldman
overcome this problem?
A) forming a joint venture with a local firm
B) identifying the potential market share
C) hiring only local employees
D) appealing to the WTO
Answer: A
Diff: 2
Skill: Application
Objective: 2
10) Which of the following advantages might an organization gain by participating in a strategic
alliance?
A) the elimination of government regulations
B) achieving economies of scale
C) minimizing import tariffs
D) increasing costs
Answer: B
Diff: 2
Skill: Concept
Objective: 2
11) IMAX, the entertainment firm, recently entered into a joint venture with Wanda Cinema
Line, a Chinese theater chain. What was IMAX primarily seeking by forming this arrangement?
A) easing entry into the Chinese market
B) acquiring technology from the Chinese firm
C) reducing economies of scale in China
D) obtaining a growing, niche Chinese market
Answer: A
Diff: 3
Skill: Concept
Objective: 2
12) Boeing collaborated in a strategic alliance with Fuji, Mitsubishi, and Kawasaki in the
development and production of the Boeing 777 to minimize Boeing's financial exposure. What
benefit of strategic alliances was Boeing seeking?
A) ease of market entry
B) shared risk
C) shared knowledge
D) synergy
Answer: B
Diff: 1
Skill: Application
Objective: 2
13) Toyota and GM created a joint venture called NUMMI because Toyota wanted to learn about
how to deal with labor and parts suppliers in the U.S. market while GM wanted to observe
Japanese management practices. What benefit of strategic alliances were Toyota and GM
primarily seeking?
B) shared risk
C) shared knowledge
D) synergy
Answer: C
Diff: 2
Skill: Concept
Objective: 2
14) ________ refers to value achieved through the combination of market entry, risk sharing, and
learning potential that is greater than what the firm could have done alone.
A) Shared risk
B) Shared knowledge
C) Synergy
D) Scale economy
Answer: C
Diff: 1
Skill: Concept
Objective: 2
15) PepsiCo and Thomas J. Lipton Co. established a joint venture. PepsiCo supplied an extensive
distribution network, and Lipton provided manufacturing expertise and brand recognition in teas.
What benefit of strategic alliances were they most likely seeking?
B) shared risk
C) shared knowledge
D) synergy
Answer: D
Diff: 2
Skill: Application
Objective: 2
16) The degree of collaboration in a strategic alliance primarily depends on the ________ of
each partner firm.
A) history
B) available resources
C) basic goals
D) leadership
Answer: C
Diff: 2
Skill: Concept
Objective: 3
17) Winston Foods and O'Toole's Soda have agreed to perform together multiple stages of the
process by which products are brought to the market. The two firms have most likely formed a
________.
A) joint venture
B) production alliance
C) process alliance
D) comprehensive alliance
Answer: D
Diff: 2
Skill: Application
Objective: 3
18) Most comprehensive alliances are organized as ________.
A) joint ventures
B) licensing agreements
C) management contracts
D) turnkey projects
Answer: A
Diff: 1
Skill: Concept
Objective: 3
19) A marketing alliance is a type of ________.

A) business-level alliance
B) operational alliance
C) corporate-level alliance
D) functional alliance
Answer: D
Diff: 1
Skill: Concept
Objective: 3
20) Chrysler and BMW formed a joint venture to build engines in South America. Which term
best describes this type of alliance?
A) franchise agreement
B) financial alliance
C) licensing agreement
D) production alliance
Answer: D
Diff: 2
Skill: Application
Objective: 3
21) General Mills and Nestle created a joint venture which fully integrated all facets of
conducting business necessary to compete against Kellogg in the European cereal market. This is
an example of a(n) ________ alliance.
A) functional
B) comprehensive
C) production
D) international
Answer: B
Diff: 2
Skill: Application
Objective: 3
22) A comprehensive alliance is formed when two or more firms ________.
A) agree to perform together multiple stages of the process to bring goods or services to market
B) manufacture products or provide services in a shared or common facility
C) share marketing services or expertise
D) reduce their financial risks
Answer: A
Diff: 2
Skill: Concept
Objective: 3
23) Avia Battery and Simon Battery both manufacture batteries in a shared facility. The two
firms have most likely established a(n) ________ alliance.
A) production
B) marketing
C) financial
D) R & D
Answer: A
Diff: 2
Skill: Application
Objective: 3
24) A production alliance is formed when ________.

A) two or more firms each manufacture products or provide services in a shared or common
facility
B) two or more firms share marketing services or expertise for a short-term development
C) firms form an alliance to reduce the financial risks associated with a project
D) partners agree to undertake joint research to develop new products
Answer: A
Diff: 2
Skill: Concept
Objective: 3
25) A(n) ________ alliance occurs when partners share expertise or services related to
distribution, pricing, and communications.
A) production
B) marketing
C) financial
D) R & D
Answer: B
Diff: 2
Skill: Concept
Objective: 3
26) A(n) ________ alliance is a functional alliance of firms that want to reduce financial risks
associated with a project.
A) production
B) marketing
C) financial
D) R & D
Answer: C
Diff: 2
Skill: Concept
Objective: 3
27) If Sony and Samsung create an alliance to manufacture 3-D televisions in a shared facility,
then the two firms have most likely formed a ________ alliance.
A) production
B) marketing
C) financial
D) research and development
Answer: A
Diff: 2
Skill: Application
Objective: 3
28) In a marketing alliance, the established firm assists the newcomer with ________.
A) management and metrics
B) promotion and distribution
C) financing and production
Answer: B
Diff: 1
Skill: Concept
Objective: 3
29) The Japanese company Bandai and the U.S. toymaker Mattel entered into a strategic alliance.
Bandai agreed to distribute Mattel products like Barbie dolls in Japan while Mattel agreed to
distribute Power Rangers in Latin America. What type of alliance is this an example of?
A) production
B) marketing
C) financial
Answer: B
Diff: 2
Skill: Application
Objective: 3
30) How does the Star Alliance primarily benefit customers?
A) coordinating service inquiries
B) supporting airport construction
C) facilitating airline transfers
D) easing government restrictions
Answer: C
Diff: 2
Skill: Concept
Objective: 3
31) A financial alliance is formed primarily for the purpose of ________.

A) performing multiple tasks as quickly as possible
B) sharing a common manufacturing facility
C) generating technological change
D) reducing investment risks
Answer: D
Diff: 2
Skill: Concept
Objective: 3
32) Bayer AG formed alliances with smaller biotechnology companies like Millennium
Pharmaceuticals and MophoSys to develop miracle drugs. What type of alliance is this an
example of?
A) production
B) marketing
C) financial
Answer: D
Diff: 2
Skill: Application
Objective: 3
33) A ________ is a confederation of organizations that band together to research and develop
new products and processes for world markets.
A) research and development alliance
B) functional alliance
C) research and development consortium
D) joint venture
Answer: C
Diff: 1
Skill: Concept
Objective: 3
34) Which of the following best explains the growing number of research and development
alliances?
A) laws regarding intellectual property rights
B) expansion among emerging economies
C) decreasing costs of high technology
D) rapid technological changes
Answer: D
Diff: 2
Skill: Concept
Objective: 3
35) Research suggests that strategic alliances are more likely to be successful if the skills and
resources of the partners are ________.
A) nearly identical
B) complementary
C) incompatible
D) observable
Answer: B
Diff: 1
Skill: Concept
Objective: 4
36) Which of the following factors is the most relevant to a firm in the process of selecting a
partner for a strategic alliance?
A) partner's wage scale for employees
B) partner's use of e-commerce
C) nature of potential partner's products
D) learning potential of the consumer
Answer: C
Diff: 2
Skill: Concept
Objective: 4
37) Partnerships should be formed between firms whose products ________.

A) compete directly
B) complement one another
C) compete indirectly
D) are in different product categories
Answer: B
Diff: 2
Skill: Concept
Objective: 4
38) What form does a joint venture usually take?
A) limited partnership
B) partnership
C) corporation
D) public-private venture
Answer: C
Diff: 2
Skill: Concept
Objective: 4
39) Which of the following is a benefit of the corporate form for joint ventures?
A) development of a centralized hierarchy
B) protection of assets
C) implementation of high-performance work systems
D) continuation of same identities
Answer: B
Diff: 2
Skill: Concept
Objective: 4
40) Which of the following most likely explains why some firms form limited partnership
arrangements instead of joint ventures?
A) stringent local restrictions
B) equal division of financial resources
C) government control of natural resources
D) decreased risk for the managing partner
Answer: A
Diff: 2
Skill: Concept
Objective: 4
41) A public-private venture is a joint venture that involves a partnership between a privately
owned firm and a ________.
A) financial institution
B) rival corporation
C) board of directors
D) government
Answer: D
Diff: 2
Skill: Concept
Objective: 4
42) The government of Abu Dhabi formed a joint venture with Exxon Mobil in 2006. What type
of joint venture is this an example of?
A) limited partnership
B) partnership
C) corporation
D) public-private venture
Answer: D
Diff: 2
Skill: Application
Objective: 4
43) In which of the following industries is a public-private venture most likely?

A) oil
B) banking
C) technology
D) pharmaceutical
Answer: A
Diff: 1
Skill: Concept
Objective: 4
44) Under a(n) ________, each partner in the joint venture fully and actively participates in
managing the alliance.
A) shared management agreement
B) assigned arrangement
C) delegated arrangement
D) consensual arrangement
Answer: A
Diff: 2
Skill: Concept
Objective: 4
45) Which type of venture is the most difficult to maintain?

A) assigned arrangement
B) shared management agreement
D) split venture arrangement
Answer: B
Diff: 2
Skill: Concept
Objective: 4
46) Which action below is permissible by the dominant partner in an assigned arrangement?
A) set agendas
B) make decisions
C) overrule partner's decisions
D) all of the above
Answer: D
Diff: 1
Skill: Concept
Objective: 4
47) Under a(n) ________, one partner assumes primary responsibility for the operations of the
alliance.
Answer: B
Diff: 2
Skill: Concept
Objective: 4
48) GM, with a 67-percent stake in a joint venture with Raba, has assumed management control
over the venture's operations. What management form is this an example of?
Answer: B
Diff: 2
Skill: Application
Objective: 4
49) Under the agreement between Coca-Cola and Danone each company supplies three members
of the joint venture's board of directors. What management form is this an example of?
Answer: A
Diff: 2
Skill: Application
Objective: 4
50) Under which management form are managers less accountable to managers in the partner
firms?
Answer: C
Diff: 2
Skill: Concept
Objective: 4
51) Boeing controls the overall operation of its strategic alliance with Fuji, Mitsubishi, and
Kawasaki. This is an example of a(n) ________.
Answer: B
Diff: 2
Skill: Concept
Objective: 4
52) What is the most likely problem associated with an assigned arrangement?
A) product incompatibility
B) management complexity
C) earnings distributions
D) conflict potential
Answer: D
Diff: 2
Skill: Concept
Objective: 4
53) Which of the following is responsible for making day-to-day decisions and strategy
implementation in a delegated arrangement?
A) both alliance partners
B) joint venture executives
C) one of the alliance partners
D) shareholders and stockholders
Answer: B
Diff: 2
Skill: Concept
Objective: 4
54) Which of the following is considered one of the primary pitfalls of strategic alliances?
A) mutual trust
B) more autonomy
C) partner compatibility
D) changing circumstances
Answer: D
Diff: 2
Skill: Concept
Objective: 5
55) Of the potential pitfalls of strategic alliances, which one is the primary cause of failure?
A) partner incompatibility
B) loss of autonomy
C) access to information
D) conflicts over distributing earnings
Answer: A
Diff: 2
Skill: Concept
Objective: 5
56) What has been the primary problem associated with the joint venture between VW and
Suzuki?
A) conflicts over earnings distributions
B) partner incompatibility
C) competing goals
D) unclear objectives
Answer: B
Diff: 2
Skill: Concept
Objective: 5
57) AT&T and Olivetti announced a strategic alliance. They could not reach an agreement on a
marketing strategy for the alliance. What type of problem is this an example of?
A) incompatibility
B) information access
C) distribution of earnings
D) loss of autonomy
Answer: A
Diff: 2
Skill: Application
Objective: 5
58) When a firm involved in a strategic alliance wants to maintain confidential information about
its operations, which pitfall of strategic alliances is likely to occur?
A) incompatibility of management styles
B) limited access to information
C) unequal distribution of earnings
D) loss of autonomy
Answer: B
Diff: 2
Skill: Concept
Objective: 5
59) A strategic alliance between Ford and Mazda experienced problems when Mazda refused to
allow Ford officials to visit the Mazda research laboratory. What was the source of this problem?
A) incompatible cultures
B) limited information access
C) unfair distribution of earnings
D) loss of autonomy for both partners
Answer: B
Diff: 2
Skill: Concept
Objective: 5
60) Rubbermaid ended a joint venture in Europe when the partner firm refused to reinvest its
profits into the development of new products. What was the source of this problem?
A) incompatibility among managers
B) inadequate access to information
C) conflicts over earnings distribution
D) loss of autonomy within the organization
Answer: C
Diff: 2
Skill: Concept
Objective: 5
61) Firms involved in joint ventures experience the pitfalls of ________ when they realize that
their decision-making powers are limited.
A) incompatibility
D) loss of autonomy
Answer: D
Diff: 2
Skill: Concept
Objective: 5
62) ________ affect(s) the viability of strategic alliances when the conditions that first motivated
the arrangement no longer exist.
A) Incompatibility
B) Information access
C) Distribution of earnings
D) Changing circumstances
Answer: D
Diff: 1
Skill: Concept
Objective: 5
63) When technological advances render an agreement obsolete, it is an example of ________.

A) incompatibility
D) changing circumstances
Answer: D
Diff: 2
Skill: Concept
Objective: 5
64) Which pitfall of alliances exists when the economic circumstances that motivated the
alliance no longer exist?
A) changing circumstances
B) loss of autonomy
D) information access
Answer: A
Diff: 2
Skill: Concept
Objective: 5
65) Sharing risk in a strategic alliance is most important for a firm that is entering a(n) ________
market.
A) competitive
B) established
C) high-tech
D) new
Answer: D
Diff: 1
Skill: Concept
Objective: 2
66) Simmons Semiconducter and Rapid Electronics have formed a strategic alliance to develop a
tool that will facilitate computer chip manufacturing. The two firms will work together only to
design the tool. Which term best describes this strategic alliance?
A) financial alliance
B) functional alliance
C) manufacturing alliance
D) comprehensive alliance
Answer: B
Diff: 2
Skill: Application
Objective: 3
67) Which type of arrangement is limited to joint ventures?

A) assigned arrangement
B) delegated arrangement
C) joint-partnership arrangement
D) shared-management arrangement
Answer: B
Diff: 2
Skill: Concept
Objective: 4
Chapter 14 International Organization Design and Control
1) ________ is the overall pattern of structural components and configurations used to manage
the total organization.
A) Organizational design
B) Functional design
C) Management
D) Strategy
Answer: A
Diff: 1
Skill: Concept
Objective: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
2) What is another name for organizational design?

A) functional design
B) strategic hierarchy
C) management design
D) organization structure
Answer: D
Diff: 1
Skill: Concept
Objective: 1
3) A study of design changes found that most firms make major design changes about every
________.
A) year
B) two years
C) five years
D) ten years
Answer: C
Diff: 2
Skill: Concept
Objective: 1
4) Tasks are assigned, resources are allocated and performance expectations are established
through ________.
A) training objectives.
B) organizational design
C) strategic hierarchy
D) intuitive leadership
Answer: B
Diff: 2
Skill: Concept
Objective: 1
businesses
5) Apex Enterprises has recently started to engage in a small amount of direct exporting. As a
result, Apex managers have delegated responsibilities for processing international orders to
individuals within the production department. Which of the following is most likely used by
Apex?
A) corollary approach
B) export department
C) international division
D) global product design
Answer: A
Diff: 2
Skill: Application
Objective: 1
6) The ________ is typical for a firm with only a small level of international activity.
Answer: A
Diff: 1
Skill: Concept
Objective: 1
7) The ________ takes responsibility for overseeing international operations, marketing

products, processing orders, working with foreign distributors, and arranging financing when
necessary.
Answer: B
Diff: 1
Skill: Concept
Objective: 1
8) The ________ allows a firm to concentrate resources and create specialized programs targeted
on international business activity while simultaneously keeping that activity segregated from the
firm's ongoing domestic activities.
Answer: C
Diff: 1
Skill: Concept
Objective: 1
9) A firm would most likely establish an international division when ________.

A) domestic market sales fluctuate
B) decision making becomes decentralized
C) foreign and domestic customers are similar
D) specialization in foreign market operations becomes essential
Answer: D
Diff: 3
Skill: Concept
Objective: 1
businesses
10) Area knowledge refers to the idea that managers must ________.
A) understand the cultural, commercial, social, and economic conditions in each host country in
which the firm does business
B) be aware of the competitive forces that have implications for global strategy in each market
C) comprehend features such as technological trends, customers needs, and competitive forces
affecting the goods the firm produces
D) have access to coworkers with expertise in basic business functions such as production,
marketing, finance, accounting, human resources management, and information technology
Answer: A
Diff: 2
Skill: Concept
Objective: 2
11) Product knowledge refers to the idea that managers must ________.
Answer: C
Diff: 2
Skill: Concept
Objective: 2
12) Functional knowledge refers to the idea that managers must ________.
Answer: D
Diff: 2
Skill: Concept
Objective: 2
13) Which of the following is one of the managerial philosophies that guide the approach to
functions like organizational design and marketing?
A) ethnocentric approach
B) transnational approach
C) supranational approach
D) intranational approach
Answer: A
Diff: 2
Skill: Concept
Objective: 2
14) The ethnocentric approach to management is most likely used by firms that ________.
A) operate internationally the same way they do domestically
B) customize their operations for each foreign market in which they serve
C) analyze the needs of their customers worldwide and then adopt standardized operations for all
markets they serve
D) adapt their marketing strategies for foreign markets, but not their finance strategies
Answer: A
Diff: 2
Skill: Concept
Objective: 2
15) The polycentric approach to management is most likely used by firms that ________.
A) operate internationally the same way they do domestically
B) customize their operations for each foreign market in which they serve
C) analyze the needs of their customers worldwide and then adopt standardized operations for all
markets they serve
D) adapt their marketing strategies for foreign markets, but not their finance strategies
Answer: B
Diff: 2
Skill: Concept
Objective: 2
16) Scale Systems, an MNE, analyzes the needs of its customers worldwide and then adopts
standardized operations for all markets that the firm serves. Which of the following is most likely
used by Scale Systems?
B) polycentric approach
C) geocentric approach
D) transnational approach
Answer: C
Diff: 2
Skill: Application
Objective: 2
17) Which design is the most common form of organizational design adopted by MNCs?
A) global area design
B) global product design
C) global functional design
D) global matrix design
Answer: B
Diff: 2
Skill: Concept
Objective: 2
18) Which design assigns worldwide responsibility for specific products or product groups to
separate operating divisions within a firm?
B) global functional design
C) global product design
D) global hybrid design
Answer: C
Diff: 2
Skill: Concept
Objective: 2
19) Parker Industries manufactures and sells a variety of goods including carpeting, power tools,
and wallpaper. Which form of organization would most like be appropriate for Parker Industries?
A) global product design
C) global matrix design
Answer: A
Diff: 2
Skill: Application
Objective: 2
businesses
20) Garvey Enterprises, an MNC, uses a global product organizational design. Garvey
manufactures and sells boating accessories to customers around the world. Which form does
Garvey most likely use?
A) C-form
B) H-form
C) M-form
D) U-form
Answer: C
Diff: 2
Skill: Application
Objective: 2
businesses
21) Manix Enterprises, an MNC, uses a global product organizational design. Manix
manufactures and sells chemical products and electronics. The firm also owns a financial
services company and a small hotel chain. Which form does Manix most likely use?
A) C-form
B) H-form
C) M-form
D) U-form
Answer: B
Diff: 2
Skill: Application
Objective: 2
businesses
22) What corporate philosophy is facilitated by a global product design?
Answer: C
Diff: 2
Skill: Concept
Objective: 2
businesses
23) Which of the following is a characteristic of the global product design?

A) minimizes costly duplication of activities
B) simplifies processes for corporate learning
C) decreases need for regional market metrics
D) facilitates global marketing activities
Answer: D
Diff: 2
Skill: Concept
Objective: 2
businesses
24) Which type of organizational design organizes the firm's activities around specific regions of
the world?
B) global area design
Answer: B
Diff: 1
Skill: Concept
Objective: 2
25) Vantage Computers, an MNE, has a multidomestic corporate philosophy. Which

organizational design would be most useful for Vantage?
C) global customer design
Answer: B
Diff: 2
Skill: Application
Objective: 2
businesses
26) Which of the following is an advantage of global area design?
A) a firm may sacrifice cost efficiencies
B) diffusion of technology may be slowed
C) there may be a duplication of resources
D) firms may develop expertise about the local market
Answer: D
Diff: 1
Skill: Concept
Objective: 2
businesses
27) Adecco, a temporary employment agency with worldwide clients, has ten regional divisions.
Managers in each division handle recruiting, distribution, promotion, and client services for that
region. Adecco is a service firm that focuses on marketing. Which organizational design is most
likely used by Adecco?
Answer: B
Diff: 2
Skill: Application
Objective: 2
businesses
28) Which of the following is an advantage of using a global area design?

A) eliminating duplication of functional areas
B) gaining cost efficiencies in manufacturing
C) tailoring the product mix in a region
D) encouraging global product planning
Answer: C
Diff: 2
Skill: Concept
Objective: 2
businesses
29) The ________ calls for a firm to create departments or divisions that have worldwide
responsibility for common organizational functions.
Answer: C
Diff: 1
Skill: Concept
Objective: 2
30) The ________ is used by MNCs that have relatively narrow or similar product lines.
Answer: B
Diff: 2
Skill: Concept
Objective: 2
31) Which of the following is an advantage of the functional design?

A) Expertise is transferred with difficulty between functional areas.
B) Managers no longer have centralized control over functional operations.
C) Attention is focused on key areas of the firm.
D) Coordination between divisions is simplified.
Answer: C
Diff: 2
Skill: Concept
Objective: 2
32) British Airways is a single-business firm with company-wide function operations dedicated
to marketing and operations, public affairs, human resources, and other basic functions. How
could the organizational design of British Airways best be described?
Answer: C
Diff: 2
Skill: Application
Objective: 2
33) Which design is practical only when a firm has relatively few products or customers?
Answer: C
Diff: 2
Skill: Concept
Objective: 2
businesses
34) The ________ is used when a firm serves different customers or customer groups, each with
specific needs calling for special expertise or attention.
D) global customer design
Answer: D
Diff: 1
Skill: Concept
Objective: 2
35) Kodak has three divisions. One division focuses on selling high-quality film to film studios.
Another division sells to professional and amateur photographers. Finally, its new business
division targets emerging markets. What organizational design does Kodak utilize?
C) global customer design
Answer: C
Diff: 2
Skill: Application
Objective: 2
businesses
36) Which organizational design is appropriate when the various customer groups targeted by a
firm are so diverse as to require totally distinct marketing approaches?
D) global customer design
Answer: D
Diff: 1
Skill: Concept
Objective: 2
37) A ________ is the result of superimposing one form of organization design on top of a
different, existing form.
Answer: C
Diff: 2
Skill: Concept
Objective: 2
38) Which organizational design promotes flexibility and fluidity in the firm?
Answer: C
Diff: 2
Skill: Concept
Objective: 2
39) Which organization design is inappropriate for firms with few products and relatively stable
markets?
Answer: C
Diff: 2
Skill: Concept
Objective: 2
businesses
40) Which term refers to the process of linking and integrating functions and activities of
different groups, units, or divisions?
A) decentralization
B) coordination
C) subsidizing
D) channeling
Answer: B
Diff: 1
Skill: Concept
Objective: 3
41) Active subsidiary boards are most useful in which type of organization?
A) an M-form
B) a U-form
C) an H-form
D) an S-form
Answer: C
Diff: 2
Skill: Concept
Objective: 3
42) Which term refers to a group of managers from different parts of the world who are
connected to each other in some way?
A) liaison
B) task force
C) informal management network
D) formal management network
Answer: C
Diff: 1
Skill: Concept
Objective: 3
43) ________ is the process of monitoring ongoing performance and making necessary changes
to keep the organization moving toward its performance goals.
A) Coordination
B) Control
C) Implementation
D) Execution
Answer: B
Diff: 1
Skill: Concept
Objective: 4
44) The main levels at which control can be implemented includes which one of the following?
A) marketing level
B) financial level
C) organizational level
D) economic level
Answer: C
Diff: 2
Skill: Concept
Objective: 4
45) ________ is intended to monitor both how well an international business formulates strategy
and how well it goes about implementing that strategy.
A) Functional control
B) Strategic control
C) Organizational control
D) Operations control
Answer: B
Diff: 2
Skill: Concept
Objective: 4
46) Strategic control focuses on how well the firm defines and maintains its desired strategic
alignment with the firm's ________.
A) administration
B) environment
C) subsidiaries
D) employees
Answer: B
Diff: 2
Skill: Concept
Objective: 4
47) What is the most critical aspect of strategic control?

A) control of firm's financial resources
B) control of a firm's marketing plans
C) quality control
D) control of labor issues
Answer: A
Diff: 2
Skill: Concept
Objective: 4
48) Sarita, a manager at a large international firm, is primarily responsible for the financial
resources of the entire organization. Sarita is most likely the firm's ________.
A) chief financial officer
B) auditor
C) controller
D) vice president of financial affairs
Answer: C
Diff: 2
Skill: Application
Objective: 4
49) Derek is the international controller at Cabot Foods, a large MNE. Derek is most likely the
most concerned about ________.
A) local financial control
B) financial forecasts
C) monthly budgets
D) managing the inventory of currencies
Answer: D
Diff: 2
Skill: Application
Objective: 4
50) What is the most common type of organizational control system?

A) responsibility center control
B) generic organizational control
C) planning process control
D) operations control
Answer: A
Diff: 2
Skill: Concept
Objective: 4
51) At Garmen Industries, each unit has the same control system and the locus of authority
resides at the firm's headquarters. Which control system is most likely used at Garmen?
Answer: B
Diff: 2
Skill: Application
Objective: 4
businesses
52) Acme Medical Equipment, an MNC, pursues a similar strategy in each market in which the
firm competes and typically experiences very predictable operations. Which control system
would most likely be best for Acme Medical Equipment?
Answer: B
Diff: 2
Skill: Application
Objective: 4
businesses
53) Usually, during the implementation of planning process control, whenever a unit fails to
meet its goals ________.
A) the head of the unit is terminated
B) the head of the unit meets with the firm's executive committee
C) the unit is absorbed into the parent entity
D) the unit is liberally granted an extension of time
Answer: B
Diff: 1
Skill: Concept
Objective: 5
54) United Distillers PLC uses the same strategy in every market. Which type of control method
should it use?
A) standardized organizational control
B) centralized organizational control
C) generic organizational control
D) responsibility center control
Answer: C
Diff: 3
Skill: Application
Objective: 4
55) A(n) ________ calls for a firm to concentrate its organizational control system on the actual
mechanics the firm uses to develop strategic plans.
Answer: C
Diff: 2
Skill: Concept
Objective: 4
56) ________ focuses specifically on operating processes and systems within both the firm and
its subsidiaries and operating units.
A) Responsibility center control
B) Generic organizational control
C) Planning process control
D) Operations control
Answer: D
Diff: 2
Skill: Concept
Objective: 4
57) How long is the scope of time for operational control typically?
A) daily
B) weekly
C) monthly
D) yearly
Answer: A
Diff: 2
Skill: Concept
Objective: 4
58) What is the first step in establishing an international control system?

A) Set control standards for performance.
B) Measure actual performance.
C) Compare performance against standards.
D) Discuss deviations with employees.
Answer: A
Diff: 1
Skill: Concept
Objective: 5
59) Which element of performance is relatively difficult to measure?

A) actual output
B) worker productivity
C) product quality
D) advertising effectiveness
Answer: D
Diff: 2
Skill: Concept
Objective: 5
60) Which element of performance is relatively easy to measure?

A) worker productivity
B) advertising effectiveness
C) ethical managerial conduct
D) employee motivation
Answer: A
Diff: 2
Skill: Concept
Objective: 5
61) A(n) ________ is a numerical index of performance that the firm wants to maintain.
A) control standard
B) performance ratio
C) accounting standard
D) benchmark
Answer: B
Diff: 2
Skill: Concept
Objective: 5
62) A common performance ratio used by many firms is ________.

A) breakeven point
B) inventory turnover
C) cost of goods sold
D) earnings per share
Answer: B
Diff: 2
Skill: Concept
Objective: 5
63) When a firm tries to exert more control over individuals than the individuals think is
appropriate, the result is ________.
A) authoritarianism
B) overcontrol
C) undercontrol
D) control resistance
Answer: B
Diff: 1
Skill: Concept
Objective: 5
64) Which of the following would most likely reduce resistance to control?
A) promoting strategic selection systems
B) creating a system that has a flexible focus
C) creating a system that creates reasonable accountability
D) providing an appeals system overseen by central management
Answer: C
Diff: 2
Skill: Concept
Objective: 5
Chapter 15 Leadership and Employee Behavior in International Business
1) Which term refers to the relatively stable set of psychological attributes that distinguishes one
individual from another?
A) personality
B) attitude
C) perception
D) ethics
Answer: A
Diff: 1
Skill: Concept
Objective: 1
2) Discussion concerning the extent to which personality attributes are biologically inherited is
commonly called the ________.
A) nurture argument
B) nature argument
C) DNA approach
D) biological argument
Answer: B
Diff: 2
Skill: Concept
Objective: 1
3) Discussion concerning the extent to which personality attributes are shaped by the social and
cultural environment in which people are raised is commonly called the ________.
A) nurture argument
B) nature argument
C) culture factor
D) biological argument
Answer: A
Diff: 2
Skill: Concept
Objective: 1
4) What Big Five personality trait refers to a person's ability to get along with others?
A) agreeableness
B) extroversion
C) conscientiousness
D) emotional stability
Answer: A
Diff: 1
Skill: Concept
Objective: 1
5) Which of the following personality traits describes a person whose behavior is gentle,
cooperative, understanding, and good-natured?
A) agreeableness
B) openness
Answer: A
Diff: 2
Skill: Concept
Objective: 1
6) Jeff is irritable, short-tempered, and uncooperative with others. He is lacking in ________.

A) agreeableness
B) extroversion
Answer: A
Diff: 2
Skill: Application
Objective: 1
7) What personality trait refers to the order and precision a person imposes on activities?
A) extroversion
B) openness
Answer: C
Diff: 1
Skill: Concept
Objective: 1
8) Sanjay, an HR manager, is organized, systematic, and responsible. Sanjay would most likely
score high on which Big Five personality dimension?
A) agreeableness
B) extroversion
C) openness
D) conscientiousness
Answer: D
Diff: 2
Skill: Application
Objective: 1
9) Conscientiousness refers to ________.
A) the ability to get along with others
B) the drive to impose order and precision
C) the inclination to maintain a balanced emotional state
D) one's rigidity of beliefs and range of interests
Answer: B
Diff: 1
Skill: Concept
Objective: 1
10) Andrea is disorganized, careless, and irresponsible. She is lacking in ________.

A) extroversion
B) openness
Answer: C
Diff: 2
Skill: Application
Objective: 1
11) Which of the following personality traits describes a person who is poised, calm, and secure?
A) agreeableness
B) openness
Answer: D
Diff: 2
Skill: Concept
Objective: 1
12) Jackie is insecure, reactive, and subject to extreme mood swings. She is lacking in ________.
A) agreeableness
B) openness
Answer: D
Diff: 2
Skill: Application
Objective: 1
13) What personality trait refers to one's comfort level with relationships?
A) agreeableness
B) extroversion
C) openness
Answer: B
Diff: 1
Skill: Concept
Objective: 1
14) Extroversion refers to ________.

A) the ability to get along with others
B) the drive to impose order and precision
C) one's comfort level with relationships
D) one's rigidity of beliefs and range of interests
Answer: C
Diff: 1
Skill: Concept
Objective: 1
15) Mike is talkative, sociable, and assertive. He could be described using the personality trait of
________.
A) agreeableness
B) extroversion
C) openness
Answer: B
Diff: 1
Skill: Application
Objective: 1
16) What personality trait refers to one's rigidity of beliefs and range of interests?
A) agreeableness
B) extroversion
C) openness
Answer: C
Diff: 2
Skill: Concept
Objective: 1
17) People who are high in ________ are willing to listen to new ideas and to change their own
beliefs as a result of new information.
A) agreeableness
B) extroversion
C) openness
Answer: C
Diff: 2
Skill: Concept
Objective: 1
18) Which Big Five personality traits are good predictors of performance across a variety of job
criteria and occupational groups in the U.S. and the European Union?
A) openness and extroversion
B) emotional stability and conscientiousness
C) extroversion and emotional stability
D) conscientiousness and agreeableness
Answer: B
Diff: 2
Skill: Concept
Objective: 1
19) ________ is a useful predictor of managerial performance in China.

A) Extroversion
B) Emotional stability
C) Openness
D) Agreeableness
Answer: A
Diff: 2
Skill: Concept
Objective: 1
20) Locus of control ________.

A) is the extent to which people believe that their behavior has a real effect on what happens to
them
B) indicates a person's beliefs about his or her capabilities to perform a task
C) is the extent to which an individual believes that power and status differences are appropriate
within hierarchical social systems
D) is the extent to which a person believes that he or she is a worthwhile and deserving
individual
Answer: A
Diff: 2
Skill: Concept
Objective: 1
21) John just found out that he did not get the promotion he wanted. He isn't upset because he
believes fate just wasn't on his side. What personality trait best explains John's views in this
situation?
A) internal locus of control
B) external locus of control
C) self-efficacy
Answer: B
Diff: 2
Skill: Application
Objective: 1
22) Self-efficacy ________.

them
individual
Answer: B
Diff: 2
Skill: Concept
Objective: 1
23) Jason spends every weekend studying for his advanced degree and regularly attends seminars
designed to improve his skills. He believes this effort will pay off in career success. What
personality trait best explains Jason's belief?
C) self-efficacy
Answer: A
Diff: 2
Skill: Application
Objective: 1
24) Authoritarianism ________.
them
individual
Answer: C
Diff: 2
Skill: Concept
Objective: 1
25) ________ indicates a person's beliefs about his or her capabilities to perform a task.
A) Internal locus of control
B) External locus of control
C) Self-efficacy
D) Conscientiousness
Answer: C
Diff: 2
Skill: Concept
Objective: 1
26) Colin has a big meeting with the managers of a company in Germany with whom he hopes to
develop a strategic alliance. Colin seriously doubts his ability to negotiate the deal. What
personality trait best describes Colin's situation?
C) self-efficacy
Answer: C
Diff: 2
Skill: Application
Objective: 1
27) Self-esteem ________.

them
individual
Answer: D
Diff: 2
Skill: Concept
Objective: 1
28) Lisa is busy studying for the GMAT. She realizes how important a good GMAT score is in
her graduate school applications, and she is confident she will perform well. What personality
trait best describes Lisa's confidence?
C) self-efficacy
Answer: C
Diff: 2
Skill: Application
Objective: 1
29) ________ is the extent to which an individual believes that power and status differences are
appropriate within hierarchical social systems like business organizations.
A) Locus of control
B) Self-efficacy
C) Authoritarianism
D) Conscientiousness
Answer: C
Diff: 2
Skill: Concept
Objective: 1
30) Martha, a manager at a marketing firm, took a personality test which indicated that she has a
high degree of authoritarianism. Which of the following would Martha most likely do?
A) give directives to subordinates
B) praise subordinates for being creative
C) provide subordinates a major role in making decisions
D) encourage subordinates to question managerial decisions
Answer: A
Diff: 2
Skill: Application
Objective: 1
31) ________ is the extent to which a person believes that he or she is a worthwhile and
deserving individual.
A) Locus of control
B) Self-esteem
C) Self-efficacy
D) Extraversion
Answer: B
Diff: 1
Skill: Concept
Objective: 1
32) Courtney seeks good jobs, is confident in her abilities, and gets a lot of intrinsic satisfaction
from her accomplishments. She could be described as someone with ________.
C) high self-esteem
D) high self-efficacy
Answer: C
Diff: 2
Skill: Application
Objective: 1
33) Which term refers to complexes of beliefs and feelings that people have about specific ideas,
situations, or other people?
A) motivations
B) attitudes
C) beliefs
D) ethics
Answer: B
Diff: 1
Skill: Concept
Objective: 1
34) Which term refers to the extent to which an individual is gratified by or fulfilled in his or her
work?
A) job satisfaction
B) job commitment
C) career awareness
D) career motivation
Answer: A
Diff: 1
Skill: Concept
Objective: 1
35) According to research, high levels of job satisfaction are typically linked to ________.
A) low workers' compensation rates
B) high performance levels
C) low absenteeism
D) high turnover
Answer: C
Diff: 2
Skill: Concept
Objective: 1
36) Which attitude reflects an individual's loyalty to an employer?
A) job satisfaction
B) organizational commitment
C) business acumen
D) organizational culture
Answer: B
Diff: 1
Skill: Concept
Objective: 1
37) ________ is the set of processes by which an individual becomes aware of and interprets
information about the environment.
A) Environmental scanning
B) Perception
C) Attitude development
D) Stereotyping
Answer: B
Diff: 2
Skill: Concept
Objective: 1
38) Which perceptual process occurs when we make inferences about someone because of one or
more characteristics they possess?
A) attitudes
B) commitment
C) scanning
D) stereotyping
Answer: D
Diff: 2
Skill: Concept
Objective: 1
39) Jason states at a meeting that Japanese managers work all the time and Swiss managers are
well organized. Which term best describes Jason's comments?
A) transferring
B) bonding
C) scanning
D) stereotyping
Answer: D
Diff: 2
Skill: Application
Objective: 1
40) When individuals experience a strong stimulus, the natural response is ________.
A) pressure
B) stress
C) exhaustion
D) frustration
Answer: B
Diff: 1
Skill: Concept
Objective: 1
41) In a study of stress among executives from 10 countries, executives from ________
experienced the least stress.
A) Egypt
B) Japan
C) Sweden
D) Germany
Answer: C
Diff: 2
Skill: Concept
Objective: 1
42) In a study of stress among executives from 10 countries, executives from ________
experienced difficulties managing their stress.
A) Japan
C) Germany
D) the United Kingdom
Answer: A
Diff: 2
Skill: Concept
Objective: 1
43) ________ is the overall set of forces that causes people to choose certain behaviors from a
set of available behaviors.
A) Perception
B) Consideration
C) Leadership
D) Motivation
Answer: D
Diff: 2
Skill: Concept
Objective: 2
44) Which of the following refers to what an individual must have or wants to have?
A) beliefs
B) goals
C) needs
D) values
Answer: C
Diff: 1
Skill: Concept
Objective: 2
45) Things that people require in order to survive, such as food, are called ________.
A) secondary needs
B) primary needs
C) survival goals
D) sufficiency items
Answer: B
Diff: 1
Skill: Concept
Objective: 2
46) Which models of motivation attempt to identify the specific need or set of needs that result in
motivated behavior?
A) need-based models
B) process-based models
C) reinforcement models
D) perceptual models
Answer: A
Diff: 1
Skill: Concept
Objective: 2
47) Which models of motivation focus more on the conscious thought processes people use to
select one behavior from among several?
A) need-based models
B) process-based models
C) reinforcement models
D) perceptual models
Answer: B
Diff: 1
Skill: Concept
Objective: 1
48) Which model of motivation deals with how people assess the consequences of their
behavioral choices and how that assessment goes into their future choice of behaviors?
A) need-based model
B) process-based model
C) reinforcement model
D) perceptual model
Answer: C
Diff: 1
Skill: Concept
Objective: 1
49) Which model of motivation incorporates the roles of rewards and punishment in maintaining
or altering existing behavioral patterns?
A) need-based model
B) process-based model
C) reinforcement model
D) perceptual model
Answer: C
Diff: 1
Skill: Concept
Objective: 2
50) Which of the following is a true statement based on research of McClelland's learned needs
framework?
A) The need for achievement exists only in developed cultures.
B) Individualistic cultures primarily promote the need for affiliation.
C) The need for achievement can be taught to people in different cultures.
D) Power-respecting cultures primarily promote the need for self-esteem.
Answer: C
Diff: 3
Skill: Concept
Objective: 2
environment
51) Which theory suggests that motivational needs can be taught to people in different cultures?
A) Maslow's hierarchy of needs
B) Vroom's expectancy theory
C) McClelland's learned needs framework
D) Herzberg's two-factor theory
Answer: C
Diff: 2
Skill: Concept
Objective: 2
environment
52) Which theory suggests that one set of factors affects dissatisfaction and another set affects
satisfaction?
A) Hofstede's cultural dimensions
B) Maslow's hierarchy of needs
C) Vroom's expectancy theory
D) Herzberg's two-factor theory
Answer: D
Diff: 2
Skill: Concept
Objective: 2
53) Which theory says that behavior resulting in a positive outcome will likely be repeated under
the same circumstances in the future?
A) reinforcement model
B) hierarchy of needs
C) expectancy theory
D) two-factor theory
Answer: A
Diff: 2
Skill: Concept
Objective: 2
54) ________ is the use of noncoercive influence to shape the goals of a group or organization,
to motivate behavior toward reaching those goals, and to help determine the group or
organizational culture.
A) Motivation
B) Commitment
C) Leadership
D) Management
Answer: C
Diff: 1
Skill: Concept
Objective: 3
55) ________ tends to rely on formal power and authority and to focus on administration and
decision making.
A) Administration
B) Management
C) Leadership
D) Supervision
Answer: B
Diff: 2
Skill: Concept
Objective: 3
56) ________ relies on personal power and focuses on motivation and communication.
A) Administration
B) Management
C) Leadership
D) Supervision
Answer: C
Diff: 2
Skill: Concept
Objective: 3
57) According to research, managers in ________ have the highest tendency to believe that they
should be experts and should know the answers to all questions raised by subordinates.
A) Italy
B) Japan
C) Germany
D) Great Britain
Answer: B
Diff: 2
Skill: Concept
Objective: 3
environment
58) ________ is the process of choosing one alternative from among a set of alternatives in order
to promote a specific objective.
A) Decision making
B) Perception
C) Motivation
D) Leadership
Answer: A
Diff: 1
Skill: Concept
Objective: 4
59) Which model of decision making suggests that managers apply logic and rationality in
making the best decisions?
A) need-based
B) process-based
C) normative
D) descriptive
Answer: C
Diff: 2
Skill: Concept
Objective: 4
60) Which model of decision making argues that behavioral processes limit a manager's ability
to always be logical and rational?
A) need-based
B) process-based
C) normative
D) descriptive
Answer: D
Diff: 2
Skill: Concept
Objective: 4
61) Which model of decision making recognizes that managers are influenced by bounded
rationality?
A) need-based
B) process-based
C) normative
D) descriptive
Answer: D
Diff: 2
Skill: Concept
Objective: 4
62) ________ suggests that decision makers are constrained in their ability to be objective and
rational by limitations of the human mind.
A) Satisficing
B) Objectivism
C) Rational thought
D) Bounded rationality
Answer: D
Diff: 2
Skill: Concept
Objective: 4
63) What behavioral process suggests that managers sometimes adopt the first minimally
acceptable alternative they identify, when a further search might suggest an even better
alternative?
A) satisficing
B) objectivism
C) maximizing
D) bounded rationality
Answer: A
Diff: 2
Skill: Concept
Objective: 4
64) What is the first step in the normative model of decision making?
A) identifying alternatives
B) problem recognition
C) evaluating alternatives
D) implementation
Answer: B
Diff: 1
Skill: Concept
Objective: 4
65) Xuan-Li, a manager at a Japanese electronics firm, has initiated a ringisho, which is currently
circulating through his work group. Xuan-Li most likely generated the ringisho for the purpose
of ________.
A) identifying potential group leaders
B) adhering to the firm's hierarchical structure
C) encouraging creative solutions to a problem
D) documenting a problem raised by management
Answer: C
Diff: 2
Skill: Application
Objective: 4
environment
66) Which task characteristic is more appropriate for problem solving by homogeneous teams?
A) complex
B) nonroutine
C) routine
D) ambiguous
Answer: C
Diff: 2
Skill: Concept
Objective: 5
67) When a task is vague, ambiguous, or unstructured a(n) ________ team is more likely to
thrive.
A) power respecting
B) individualistic
C) uncertainty avoiding
D) uncertainty accepting
Answer: D
Diff: 2
Skill: Concept
Objective: 5
68) Team cohesiveness is more likely to emerge naturally in a(n) ________ culture.
A) collectivistic
B) individualistic
C) uncertainty avoiding
D) uncertainty accepting
Answer: A
Diff: 2
Skill: Concept
Objective: 5
69) Elisa, a manager at Thornton Consulting, recently noticed that turnover is particularly high in
one of the production units. Elisa assumes that the turnover is caused by low wages, so she
immediately increases the salaries of all employees in the unit. Elisa's actions have most likely
been affected by ________.
A) normative decision making
B) uncertainty avoidance
C) bounded rationality
D) acculteration
Answer: C
Diff: 2
Skill: Application
Objective: 4
70) ________ includes behaviors intending to ensure the safety and security of the leader and the
group.
A) Self-protective leadership
B) Autonomous leadership
C) Participative leadership
D) Charismatic leadership
Answer: A
Diff: 3
Skill: Concept
Objective: 3
Chapter 16 International Marketing
1) ________ is the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives.
A) Strategy
B) Marketing
C) Production
D) Management
Answer: B
Diff: 1
Skill: Concept
Objective: 1
2) What is the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to create exchanges across national boundaries that
satisfy individual and organizational objectives?
A) globalization
B) international marketing
C) organizational design
D) international management
Answer: B
Diff: 1
Skill: Concept
Objective: 1
3) Marketing managers at Unique Home Furnishings strive to develop products, pricing

strategies, promotional strategies, and distribution tactics that set the firm's products apart from
those of competitors in the eyes of customers. Unique Home Furnishings has cultivated an image
of perceived quality and fashion that allows the firm to charge prices higher than most furniture
businesses. What is the overall business strategy of Unique Home Furnishings?
A) focus
B) cost leadership
C) differentiation
D) related diversification
Answer: C
Diff: 2
Skill: Application
Objective: 1
Learning Outcome: Explain the functions of marketing in international business
4) Marketing managers at Computex concentrate their promotional efforts on advertising the low
price of their computer components. What business strategy is Computex supporting?
A) focus
B) cost leadership
C) differentiation
Answer: B
Diff: 2
Skill: Application
Objective: 1
5) Which of the following is one the key issues facing international marketing managers?
A) how to finance the firm's product
B) how to design the firm's product
C) how to select the firm's employees
D) how to sell the firm's product
Answer: D
Diff: 2
Skill: Concept
Objective: 1
6) SMH directs its marketing efforts on selling an inexpensive line of watches to young, fashion-
oriented customers. What business strategy is SMH pursuing?
A) focus
B) cost leadership
C) differentiation
Answer: A
Diff: 2
Skill: Concept
Objective: 1
7) Which element of the marketing mix includes the development of the tangible and intangible
features that meet customer needs in diverse markets?
A) product
B) pricing
C) promotion
D) place
Answer: A
Diff: 1
Skill: Concept
Objective: 1
8) Promotion primarily involves ________.
A) developing tangible and intangible features that meet customer needs in diverse markets
B) developing policies that generate revenue and strategically shape the competitive environment
C) devising ways to enhance the desirability of the product to potential buyers
D) getting products to customers via transportation and merchandising
Answer: C
Diff: 2
Skill: Concept
Objective: 1
9) Which element of the marketing mix includes the development of policies that bring in
revenue and strategically shape the competitive environment?
A) product
B) pricing
C) promotion
D) place
Answer: B
Diff: 1
Skill: Concept
Objective: 1
10) Which element of the marketing mix includes devising ways to enhance the desirability of
the product or service to potential buyers?
A) product
B) pricing
C) promotion
D) place
Answer: C
Diff: 1
Skill: Concept
Objective: 1
11) What is the function of pricing in the marketing mix?

A) assessing customer needs and values
B) developing policies that generate revenue
C) increasing the desirability of the product to buyers
D) transporting products to customers quickly and inexpensively
Answer: B
Diff: 2
Skill: Concept
Objective: 1
12) Product ________.
A) involves the development of tangible and intangible features that meet customer needs in
diverse markets
B) involves the development of policies that bring in revenue and strategically shape the
competitive environment
C) involves devising ways to enhance the desirability of the product to potential buyers
D) gets products and services into the hands of customers via transportation and merchandising
Answer: A
Diff: 2
Skill: Concept
Objective: 1
13) IBM is working to adapt its advertising campaign for a market in Europe. What element of
the marketing mix is being addressed in this example?
A) product
B) pricing
C) promotion
D) place
Answer: C
Diff: 2
Skill: Application
Objective: 4
14) In the international marketing mix, the place element focuses on ________.
A) revenue policies
B) advertising and product image
C) transportation and distribution
D) location of manufacturing operations
Answer: C
Diff: 2
Skill: Concept
Objective: 1
15) Which approach to international marketing is the easiest for a firm to adopt?
Answer: A
Diff: 2
Skill: Concept
Objective: 1
16) When adopting a(n) ________ approach, a firm applies the domestic marketing mix abroad.
A) ethnocentric
B) polycentric
C) geocentric
D) multidomestic
Answer: A
Diff: 2
Skill: Concept
Objective: 1
17) Maddox Home Goods is based in Illinois but has plans to target the housewares market in
Europe. Maddox executives believe that the firm's successful U.S. marketing strategy will work
equally well in the European market. Maddox most likely has a(n) ________ approach to
international marketing.
A) ethnocentric
B) polycentric
C) geocentric
D) multidomestic
Answer: A
Diff: 2
Skill: Application
Objective: 1
18) Which approach to international marketing is the most expensive to adopt?

D) multidomestic approach
Answer: B
Diff: 2
Skill: Concept
Objective: 1
19) Organix Foods, a U.S. firm, is expanding its operations overseas. Executives at the firm plan
to take a polycentric approach to international marketing. Which of the following actions will
Organix most likely take?
A) using the same marketing mix in domestic and foreign markets
B) customizing the marketing mix for each foreign market
C) standardizing the marketing mix and product
D) developing a bilingual marketing mix
Answer: B
Diff: 3
Skill: Application
Objective: 1
20) Marketers at Divine Design assume that customers will pay a higher price for a product that
exactly meets their needs than a product that does not. Which approach to international
marketing is most likely used by Divine Design?
A) ethnocentric
B) polycentric
C) geocentric
D) transnational
Answer: B
Diff: 2
Skill: Application
Objective: 1
21) Firms that view themselves as multidomestic are more likely to adopt a(n) ________
approach to international marketing.
A) ethnocentric
B) polycentric
C) geocentric
D) transnational
Answer: B
Diff: 2
Skill: Concept
Objective: 1
22) Which approach to marketing allows the firm to provide essentially the same product or
service in different markets and to use essentially the same marketing approach globally?
A) polycentric
B) geocentric
C) multidomestic
D) transnational
Answer: B
Diff: 1
Skill: Concept
Objective: 1
23) A firm that follows an ethnocentric approach to marketing standardizes the marketing mix
based on the ________.
A) needs of customers around the world
B) ability of the firm to transport goods
C) needs of home country customers
D) ability of the firm to customize
Answer: C
Diff: 2
Skill: Concept
Objective: 1
24) Which of the following is asserted by advocates of standardization?
A) customizing products is essential for high profits
B) customers in developed countries are similar
C) emerging economies are competitive
D) differentiation indicates bias
Answer: B
Diff: 2
Skill: Concept
Objective: 1
25) What advantage does a firm that standardizes its international marketing mix achieve?
A) market share
B) niche revenues
Answer: C
Diff: 2
Skill: Concept
Objective: 1
26) Both the ethnocentric and geocentric approaches to international marketing advocate the
concept of ________.
A) codetermination
B) standardization
C) customization
D) differentiation
Answer: B
Diff: 2
Skill: Concept
Objective: 1
27) What organizational characteristic is suggested by the standardization approach to

international marketing?
A) centralized
B) decentralized
C) global product design
D) global area design
Answer: A
Diff: 2
Skill: Concept
Objective: 1
28) Which of the following is an advantage of standardized international marketing?
A) reduces marketing costs
B) reflects different conditions of product use
C) facilitates decentralized control of marketing
D) prevents economies of scale in production
Answer: A
Diff: 2
Skill: Concept
Objective: 1
29) Which of the following is a disadvantage of customized international marketing?

A) creates inefficiencies in R&D
B) ignores different conditions of product use
C) inhibits local marketing initiatives
D) ignores differences in buyer behavior patterns
Answer: A
Diff: 2
Skill: Concept
Objective: 1
30) Which of the following is a tangible component of a product?

A) image
B) installation
C) warranty
D) packaging
Answer: D
Diff: 1
Skill: Concept
Objective: 2
31) Carver Foods is an MNE that sells baby food around the world. What product component
will most likely be standardized by Carver in all foreign markets?
A) labeling
B) ingredients
C) brand name
D) container size
Answer: C
Diff: 2
Skill: Application
Objective: 2
32) Origin Outfitters uses a geocentric approach to international marketing. Which pricing policy
does Origin Outfitters most likely use?
A) standard
B) two-tiered
C) market
D) global
Answer: A
Diff: 2
Skill: Application
Objective: 3
33) Which product category listed below lends itself to a standard price policy?
A) commodities
B) luxury goods
C) consumer packaged goods
D) services
Answer: A
Diff: 2
Skill: Concept
Objective: 3
34) Selling a firm's products in a foreign market for a price lower than that charged in the firm's
domestic market makes the firm vulnerable to an allegation of ________.
A) predatory pricing
B) dumping
C) parallel importing
D) gray marketing
Answer: B
Diff: 2
Skill: Concept
Objective: 3
35) Mazda was charged with dumping minivans in the U.S. market. What pricing policy was
Mazda most likely using?
A) standard
B) two-tiered
C) market
D) global
Answer: B
Diff: 2
Skill: Application
Objective: 3
36) Under a ________ price policy, the firm sets one price for all its domestic sales and a second
price for all its international sales.
A) standard
B) two-tiered
C) market
D) global
Answer: B
Diff: 2
Skill: Concept
Objective: 3
37) Under a ________ price policy, the firm charges the same price for its products and services
regardless of where they are sold or the nationality of the customer.
A) standard
B) two-tiered
C) market
D) global
Answer: A
Diff: 2
Skill: Concept
Objective: 3
38) Under a ________ price policy, the firm customizes its prices on a market-by-market basis to
maximize its profits in each market.
A) standard
B) two-tiered
C) market
D) global
Answer: C
Diff: 2
Skill: Concept
Objective: 3
39) Digitex, an MNE, customizes its marketing mix in each market that the firm enters to meet
the idiosyncratic needs of customers in different foreign markets. Which approach does Digitex
most likely use?
A) ethnocentric
B) geocentric
C) polycentric
D) neocentric
Answer: C
Diff: 2
Skill: Concept
Objective: 1, 3
40) Which term best describes the market pricing policy?
A) simple
B) integrated
C) complex
D) standardized
Answer: C
Diff: 1
Skill: Concept
Objective: 3
41) Under the ________ price policy, firms can set higher prices where markets will tolerate
them and lower prices where necessary to remain competitive.
A) standard
B) two-tiered
C) market
D) global
Answer: C
Diff: 2
Skill: Concept
Objective: 3
42) Executives at Dawson Manufacturing, an MNE, are considering the implementation of a

market pricing policy. Which of the following represents the most potential risk to Dawson of
this type of policy?
A) inability to assess marginal costs
B) damage to the firm's brand name
C) development of a market
D) complaints from competitors
Answer: B
Diff: 2
Skill: Application
Objective: 3
43) Which of the following occurs when products are imported into a country legally but outside
the normal channels of distribution authorized by the manufacturer?
A) gray market
B) parallel exporting
C) black market
D) price gouging
Answer: A
Diff: 1
Skill: Concept
Objective: 3
44) Which of the following would most likely trigger a gray market?
A) a firm has large price differences among different markets
B) a firm prices its products almost equally in all markets
C) products are illegal in one market but legal in another
D) products are closely regulated by the government
Answer: A
Diff: 3
Skill: Concept
Objective: 3
45) A Taiwanese discount store is able to purchase and import Coke made in the United States
for 27% less than the price of Coke made in Taiwan. This is a example of a ________.
A) black market
B) gray market
C) controlled market
D) free market
Answer: B
Diff: 2
Skill: Application
Objective: 3
46) Which component of the marketing mix encompasses all efforts by an international firm to
enhance the desirability of its products among potential buyers?
A) product
B) price
C) place
D) promotion
Answer: D
Diff: 1
Skill: Concept
Objective: 4
47) ________ would be a secondary, or tertiary target of international promotional activities.

A) Buyers
B) Distributors
C) Competitors
D) Potential customers
Answer: C
Diff: 1
Skill: Concept
Objective: 4
48) Which term refers to the mix of advertising, personal selling, sales promotion, and public
relations used by a firm to market its products?
A) marketing mix
B) promotion mix
C) public relations mix
D) communications mix
Answer: B
Diff: 1
Skill: Concept
Objective: 4
49) Which of the following is one of the elements of the promotion mix?
A) advertising
B) e-commerce
C) the internet
D) human resources
Answer: A
Diff: 1
Skill: Concept
Objective: 4
50) Which term refers to the facts or impressions the advertiser wants to convey to potential
customers?
A) medium
B) message
C) copy
D) graphic
Answer: B
Diff: 1
Skill: Concept
Objective: 4
51) Harley-Davidson often highlights the origin of its products. Origin is the ________.
A) medium
B) message
C) copy
D) channel
Answer: B
Diff: 2
Skill: Concept
Objective: 4
52) The ________ is the communication channel used by the advertiser to convey a message.
A) medium
B) message
C) copy
D) graphic
Answer: A
Diff: 1
Skill: Concept
Objective: 4
53) Which of the following products most likely lends itself to standardized advertising due to its
universal appeal?
A) Progressive auto insurance
B) McDonald's hamburgers
C) Capital One credit cards
D) Palmolive soap
Answer: B
Diff: 2
Skill: Application
Objective: 4
54) What element of the promotion mix promotes a close, personal contact with customers?
A) advertising
B) public relations
C) personal selling
D) sales promotions
Answer: C
Diff: 1
Skill: Concept
Objective: 4
55) Specialized marketing efforts such as coupons are a part of ________.

A) advertising
B) public relations
C) sales promotions
D) brand placements
Answer: C
Diff: 1
Skill: Concept
Objective: 4
56) Pizza Hut is offering free pizza slices in Beijing. This is an example of ________.
A) advertising
B) sales promotion
C) public relations
D) brand placement
Answer: B
Diff: 2
Skill: Application
Objective: 4
57) Which element of the promotion mix consists of efforts aimed at enhancing a firm's
reputation and image with the general public?
A) sales promotion
B) personal selling
C) public relations
D) brand placement
Answer: C
Diff: 1
Skill: Concept
Objective: 4
58) Toyota operates a manufacturing facility in Georgetown, Kentucky. To build goodwill,

Toyota provides grants to local charities, funds college scholarships to graduating high school
students, and sponsors local youth sports teams. This is an example of ________.
A) sales promotion
B) personal selling
C) public relations
D) brand placement
Answer: C
Diff: 2
Skill: Application
Objective: 4
59) Which of the following is an advantage of using personal selling in international marketing?
A) low-cost market entry strategy
B) access to local market information
C) standardization of promotion mix
D) enhancement of firm's reputation
Answer: B
Diff: 2
Skill: Concept
Objective: 4
60) ________ is the process of getting products and services from the firm into the hands of
customers.
A) Product development
B) Distribution
C) Marketing
D) Promoting
Answer: B
Diff: 1
Skill: Concept
Objective: 5
61) What term refers to the number of stages in the distribution channel?
A) supply chain
B) stage hierarchy
C) channel length
D) channel width
Answer: C
Diff: 1
Skill: Concept
Objective: 5
62) Which of the following buys products and services from the manufacturer and then resells
them to retailers?
A) consumer
B) wholesaler
C) franchiser
D) exporter
Answer: B
Diff: 2
Skill: Concept
Objective: 5
63) Marks and Spencer buys apparel from international wholesalers for sale to consumers in its
stores in the United Kingdom. Marks and Spencer is a(n) ________.
A) manufacturer
B) wholesaler
C) retailer
D) intermediary
Answer: C
Diff: 2
Skill: Application
Objective: 5
64) ________ is when a firm is dealing directly with the customer.
A) Channel sales
B) Import agenting
C) Direct sales
D) Indirect sales
Answer: C
Diff: 1
Skill: Concept
Objective: 5
65) What is an advantage of using trains as a mode of transportation for exports?

A) reliable
B) direct
C) flexible
D) fast
Answer: A
Diff: 1
Skill: Concept
Objective: 5
Chapter 17 International Operations Management
1) ________ is the set of activities an organization uses to transform different kinds of inputs
into final goods and services.
A) Global distribution
B) International marketing
C) Operations management
D) Organizational design
Answer: C
Diff: 1
Skill: Concept
Objective: 1
2) The transformation of inputs to final goods and services in an international firm is called
international ________.
A) distribution
B) marketing
C) operations management
D) supply chain management
Answer: C
Diff: 1
Skill: Concept
Objective: 1
3) What is the central role of operations management within an international firm?

A) creating value
B) marketing products
C) managing inventory
D) supporting vertical integration
Answer: A
Diff: 2
Skill: Concept
Objective: 1
4) What business strategy relies on creating goods that are clearly different from the
competitors?
A) differentiation
B) cost leadership
C) focus
D) niche
Answer: A
Diff: 2
Skill: Concept
Objective: 1
5) What has the most significant impact on planning and implementing operations management
activities?
A) centralization of authority
C) business strategy
D) market share
Answer: C
Diff: 2
Skill: Concept
Objective: 1
Learning Outcome: Describe how global production and logistics decisions are made
6) Porsche competes on the basis of product performance and status. Its production facilities
need to be located where there is a skilled labor force despite the higher costs of that labor. What
business strategy is affecting operations management decisions in this case?
A) differentiation
B) cost leadership
C) focus
D) niche
Answer: A
Diff: 2
Skill: Application
Objective: 1
7) Hong Kong's Roly International Holdings locates its factories in China where it can produce
inexpensive Christmas decorations due to low wage rates. These goods are then shipped via
slow, inexpensive cargo ships to discounters like Wal-Mart. Roly International Holdings follows
a ________ strategy in its operations management.
A) differentiation
B) cost leadership
C) focus
D) niche
Answer: B
Diff: 2
Skill: Application
Objective: 1
8) Forest Foods is an MNE with operations in Asia, Europe, and North America. Forest Foods
uses standardized production process and technologies in every market in which it conducts
business. The operations systems at Forest Foods should most likely be ________.
A) regionally adapted
B) locally designed
C) nationally customized
D) globally integrated
Answer: D
Diff: 2
Skill: Application
Objective: 1
9) When managers decide on modes of transportation and methods of inventory control, what
area of international operations management is involved?
A) resources
B) location
C) accounting
D) logistics
Answer: D
Diff: 1
Skill: Concept
Objective: 1
10) What are operations management decisions, processes, and issues that involve the creation of
tangible goods called?
A) service operations management
B) production management
C) management of goods
D) manufacturing
Answer: B
Diff: 1
Skill: Concept
Objective: 2
11) What are operations management decisions, processes, and issues that involve the creation of
intangible services called?
A) service operations management
C) management of goods
D) manufacturing
Answer: A
Diff: 1
Skill: Concept
Objective: 2
12) ________ is the creation of goods by transforming raw materials and component parts in
combination with capital, labor, and technology.
A) Service operations management
B) Production management
C) Management of goods
D) Manufacturing
Answer: D
Diff: 1
Skill: Concept
Objective: 2
13) Ford takes thousands of component parts including sheet metal, engine parts, and upholstery
and combines them to make automobiles. This is an example of ________ activities.
A) manufacturing
B) distribution
C) logistical
D) operations
Answer: A
Diff: 1
Skill: Application
Objective: 2
14) The set of processes and steps a firm uses to acquire the various resources it needs to create it
products is called ________.
A) procuring
B) outsourcing
C) diversifying
D) onboarding
Answer: A
Diff: 1
Skill: Concept
Objective: 2
15) Sourcing and procuring refer to ________.

A) supply chain management
C) service operations management
D) integration management
Answer: A
Diff: 1
Skill: Concept
Objective: 2
16) What is the first step in the supply chain management process?
A) deciding how to acquire raw materials from local suppliers
B) determining the appropriate degree of vertical integration
C) deciding how to transport finished goods to buyers
D) determining the most profitable target market
Answer: B
Diff: 2
Skill: Concept
Objective: 2
17) ________ is the extent to which a firm either provides its own resources or obtains them
from other sources.
A) Supply chain management
B) Vertical integration
D) Cross-ownership
Answer: B
Diff: 2
Skill: Concept
Objective: 2
18) ________ refers to the situation when various units within the firm can be seen as suppliers
to other units within the firm.
A) Supply chain management
B) Vertical integration
D) Cross-ownership
Answer: B
Diff: 2
Skill: Concept
Objective: 2
19) Firms that have little ________ are involved in very few steps in the production chain.
A) standardization
B) vertical integration
D) customization
Answer: B
Diff: 2
Skill: Concept
Objective: 2
20) BP has several units responsible for its business. One unit explores the world for natural gas
and crude oil. Another unit extracts the oil and gas. Another unit transports the oil and gas, and
its refineries transform the crude oil into gasoline and other products. BP trucks transport the
refined products to company-owned service stations for sale to the final consumer. BP's
operations management system is based on ________.
A) horizontal integration
B) vertical integration
C) intracompany transfers
D) cross-ownership
Answer: B
Diff: 2
Skill: Application
Objective: 2
21) Heineken NV buys grains, labels, bottles, and cartons from other suppliers prior to brewing
and bottling its beer. This suggests that Heineken has little ________.
A) supply chain management
B) horizontal integration
C) vertical integration
D) cross-ownership
Answer: C
Diff: 2
Skill: Application
Objective: 2
22) The make-or-buy decision primarily relates to ________.

A) reducing production
B) acquiring components
C) forming joint ventures
D) obtaining foreign facilities
Answer: B
Diff: 1
Skill: Concept
Objective: 2
23) Executives at Elfman Computers have decided that the firm will make the memory chips,
microprocessors, power supplies, and disc drives needed to manufacture the firm's computer
systems. As a result, Elfman will most likely increase its control over ________.
A) competitor reputations
B) delivery schedules
C) market demands
D) exporting fees
Answer: B
Diff: 2
Skill: Application
Objective: 2
24) A firm should most likely make a product internally when there is a ________ potential for
competitive advantage and a ________ degree of strategic vulnerability.
A) high; high
B) low; high
C) high; low
D) low; low
Answer: A
Diff: 2
Skill: Concept
Objective: 2
25) Buying an input is most sensible when there is a(n) ________ potential for competitive
advantage and a(n) ________ degree of strategic vulnerability.
A) high; moderate
B) intermediate; moderate
C) high; low
D) low; low
Answer: D
Diff: 2
Skill: Concept
Objective: 2
26) Special ventures or contract arrangements for inputs are most appropriate when there is a (n)
________ potential for competitive advantage and a (n) ________ degree of strategic
vulnerability.
A) high; high
B) intermediate; moderate
C) high; moderate
D) low; low
Answer: B
Diff: 2
Skill: Concept
Objective: 2
27) What increases the difficulty and expense for international businesses that try to enforce
contracts with foreign suppliers?
A) changes in technology
B) fluctuating exchange rates
C) differences in national legal systems
D) lack of oversight from World Trade Organization
Answer: C
Diff: 2
Skill: Concept
Objective: 2
28) In the Japanese keiretsu system, contract enforcement between firms and suppliers is less
problematic because of ________.
A) overlapping judicial systems
B) cross-ownership of shares
C) horizontal integration
D) value chains
Answer: B
Diff: 2
Skill: Concept
Objective: 2
environment
29) Why do most personal computer manufacturers purchase components from outside
suppliers?
A) protection of intellectual property rights
B) fast rate of technological change
C) close oversight of quality ratios
D) fluctuation in currency rates
Answer: B
Diff: 3
Skill: Application
Objective: 2
30) What is the primary factor that influences the decision of where to locate production
facilities?
A) regulatory policies
B) resource availability
C) distribution options
D) organizational structure
Answer: B
Diff: 2
Skill: Concept
Objective: 2
31) Christopher Radko, a premium holiday ornament manufacturer, is considering locating
manufacturing facilities in China in order to lower costs. However, the firm fears a backlash
from ornament collectors who prefer ornaments made in Eastern Europe. What location issue is
Christopher Radko dealing with?
A) resource availability
B) country-of-origin effects
C) product-related issues
D) inventory management policies
Answer: B
Diff: 2
Skill: Application
Objective: 2
32) Which theory suggests that countries with large, low-cost endowments of a factor of
production will attract firms needing that factor of production?
A) national competitive advantage theory
B) Heckscher-Ohlin theory
D) absolute advantage theory
Answer: B
Diff: 2
Skill: Concept
Objective: 2
33) Which theory explains why the low labor costs of Bangladesh have attracted toy, footwear,
and textile manufacturers to develop manufacturing facilities in Bangladesh?
A) national competitive advantage theory
B) Heckscher-Ohlin theory
D) absolute advantage theory
Answer: B
Diff: 2
Skill: Application
Objective: 2
34) ________ refer(s) to the reputation a country has for products it produces.
A) Country brand image
B) National reputation
C) Country-of-origin effects
D) Ethnocentric effects
Answer: C
Diff: 1
Skill: Concept
Objective: 2
35) An experiment found that consumer preference for Tempomax watches fell by 74 percent
when the consumers were told that Tempomax watches were produced in Pakistan instead of
Germany. Which term best explains this occurrence?
B) country-of-origin effects
C) ethnocentric effects
D) national reputation
Answer: B
Diff: 2
Skill: Application
Objective: 2
36) A product's value-to-weight ratio primarily affects ________.

A) inventory maintenance
B) make-or-buy decisions
C) transportation costs
D) customer feedback
Answer: C
Diff: 2
Skill: Concept
Objective: 2
37) When Nissan chose to locate a new manufacturing facility in Jackson, Mississippi, it
received $295 million in incentives. What factor was likely the most critical in the location
decision?
A) infrastructure
B) government policies
C) country-of-origin effects
D) resource availability
Answer: B
Diff: 2
Skill: Concept
Objective: 2
38) A(n) ________ is a specially designated and controlled geographical area in which imported
or exported goods receive preferential tariff treatment.
A) economic union
B) customs union
C) free trade zone
D) free trade area
Answer: C
Diff: 1
Skill: Concept
Objective: 2
39) Nissan stores hundreds of cars that will be sold in the southern part of North America at the
Port of Houston. How does Nissan most likely benefit from this arrangement?
A) lowering costs
B) improving reliability
C) minimizing advertising needs
D) improving supply chain flexibility
Answer: A
Diff: 2
Skill: Application
Objective: 2
40) The suppliers used by Morrison Controls deliver components directly to Morrison's
manufacturing center as the inputs are needed for production to minimize Morrison's inventory
costs. Morrison most likely uses ________.
A) one-stop shipping
B) just-in-time systems
C) materials management
D) customized logistics processes
Answer: B
Diff: 2
Skill: Application
Objective: 2
41) ________ is the management of the flow of materials, parts, supplies, and other resources
from suppliers to the firm; the flow of materials, parts, supplies, and other resources within and
between units of the firm itself; and the flow of finished products, services, and goods from the
firm to customers.
A) International logistics
B) International distribution
C) International operations management
D) Organizational design
Answer: A
Diff: 1
Skill: Concept
Objective: 2
42) The management of the flow of materials, parts, supplies, and other resources from suppliers
to the firm combined with the flow of materials, parts, supplies, and other resources within and
between units of the firm itself is called ________.
A) international logistics
B) materials management
D) customized logistics
Answer: B
Diff: 2
Skill: Concept
Objective: 2
43) Patricia, a manager at Global Airways, has the responsibility of deciding how many
passengers Global Airways can serve at a given time. Patricia is most likely involved with
________.
A) operations management
B) services production planning
C) capacity planning
D) service operations management
Answer: C
Diff: 2
Skill: Application
Objective: 2
44) Larson Financial Services, an international accounting firm, provides customers with tax
advice. Which characteristic of international services is most likely an issue for Larson?
A) service intangibility
B) service perishability
C) customer participation
D) product bundling and compatibility
Answer: A
Diff: 2
Skill: Application
Objective: 2
45) Multiple tables at Red Lobster were empty yesterday afternoon. Which characteristic of
services is most likely a concern for the restaurant chain?
A) service intangibility
B) service perishability
C) customer participation
D) product bundling and compatibility
Answer: B
Diff: 2
Skill: Application
Objective: 2
46) Which service typically cannot occur without customer participation?
A) personal communication
B) financial advising
C) foreign tourism
D) service calls
Answer: C
Diff: 2
Skill: Concept
Objective: 2
47) The Swedish appliance maker AB Electrolux manufactures vacuum cleaners and has service
operations set up to repair those products for consumers who buy them. AB Electrolux is most
likely attempting to ________.
A) provide intangible service options
B) improve economies of scope
C) comply with consumer laws
D) bundle sales with service
Answer: D
Diff: 2
Skill: Application
Objective: 2
48) ________ is an economic measure of efficiency that summarizes the value of outputs relative
to the value of the inputs used to create the outputs.
A) GNP
B) Productivity
C) Turnover ratio
D) Return on investment
Answer: B
Diff: 2
Skill: Concept
Objective: 3
49) Productivity is most likely important because it ________.

A) establishes just-in-time manufacturing
B) follows changing technological innovations
C) contributes to the overall standard of living within a particular country
D) provides government facilitators with modern techniques, tools, and data
Answer: C
Diff: 2
Skill: Concept
Objective: 3
50) Executives at Moxley Manufacturing want to improve the firm's productivity. Which of the
following would most likely help Moxley achieve this goal?
A) decrease costly R&D investments
B) improve performance appraisals
C) increase employee involvement
D) encourage union participation
Answer: C
Diff: 2
Skill: Application
Objective: 3
51) Benson Electronics wants to increase employee involvement for the purpose of enhancing
productivity. Which of the following would most likely enable Benson to accomplish this goal?
A) decrease work hours
B) provide salary increases
C) offer additional health benefits
D) implement self-managed teams
Answer: D
Diff: 2
Skill: Application
Objective: 3
52) ________ is the totality of features and characteristics of a product or service that bear on its
ability to satisfy stated or implied needs.
A) Production
B) Quality
C) Benefit
D) Marketing
Answer: B
Diff: 1
Skill: Concept
Objective: 4
53) Which of the following areas is covered by ISO 9000 standards?

A) product testing
B) employee testing
C) logistics
D) sales records
Answer: A
Diff: 2
Skill: Concept
Objective: 4
54) ________ is an integrated effort to systematically and continuously improve the quality of an
organization's products and/or services.
A) ISO 9000
B) Standardization
C) Total quality management
D) Just-in-time management
Answer: C
Diff: 2
Skill: Concept
Objective: 4
55) What are the guidelines that provide the basis for quality certification called?
A) WTO standards
B) ISO 1000
C) ISO 9000
D) TQM standards
Answer: C
Diff: 1
Skill: Concept
Objective: 4
56) What organization has been working to develop and refine an international set of quality
guidelines?
A) American Society for Quality Control
B) World Trade Organization
C) International Standards Organization
D) International Organization for Standardization
Answer: D
Diff: 2
Skill: Concept
Objective: 4
57) Why did some Korean firms initially face difficulties competing in Europe?
A) undocumented repair policies
B) poor reputation for quality
C) high product costs
D) weak supply chain
Answer: B
Diff: 2
Skill: Concept
Objective: 4
58) Which of the following is an essential component of total quality management?
A) competitor input
B) high-quality materials
C) antiquated technology
D) control frameworks
Answer: B
Diff: 2
Skill: Concept
Objective: 4
59) ________ is a family of mathematically based tools for monitoring and controlling quality.
A) Total quality management
B) Statistical process control
D) Just-in-time management
Answer: B
Diff: 2
Skill: Concept
Objective: 4
60) ________ is the process of legally and ethically studying how other firms do something in a
high-quality way and then either imitating or improving on their methods.
A) Total quality management
B) Statistical process control
C) Benchmarking
D) Scorecarding
Answer: C
Diff: 1
Skill: Concept
Objective: 4
61) Xerox sent a team of managers to Japan to study Canon copiers there. They found the copier
was of higher quality than Xerox's copiers. Xerox then attempted to imitate Canon's methods.
This is an example of ________.
A) total quality management
B) statistical process control
C) benchmarking
D) competitive parity
Answer: C
Diff: 2
Skill: Application
Objective: 4
62) Perrier takes samples of finished products and measures their actual content to assess if the
contents measure within the appropriate range. This is an example of ________.
A) total quality management
B) statistical process control
C) benchmarking
D) competitive parity
Answer: B
Diff: 2
Skill: Application
Objective: 4
63) When data are in a form that is valuable to a manager in making decisions and performing
related tasks, it is called ________.
A) reports
B) information
C) statistics
D) analysis
Answer: B
Diff: 1
Skill: Concept
Objective: 5
64) A(n) ________ is a methodology created by a firm to gather, assemble, and provide data in a
form or forms useful to managers.
A) TQM program
B) information system
C) benchmarking plan
D) statistical process control
Answer: B
Diff: 2
Skill: Concept
Objective: 5
Chapter 18 International Financial Management
1) Which currency do exporters typically prefer to use in transactions?

A) U.S. dollars
B) Japanese yen
C) home country currency
D) host country currency
Answer: C
Diff: 2
Skill: Concept
Objective: 1
2) Which currency do importers typically prefer to use in transactions?

A) U.S. dollars
B) Japanese yen
C) home country currency
D) host country currency
Answer: C
Diff: 2
Skill: Concept
Objective: 1
3) More than 70 percent of developing country exports are invoiced in ________.

A) U.S. dollars
B) euros
C) Japanese yen
D) Swiss francs
Answer: A
Diff: 1
Skill: Concept
Objective: 1
4) Which currency is used most often for transactions involving commercial aircraft?
A) U.S. dollars
B) euros
C) Japanese yen
D) Swiss francs
Answer: A
Diff: 1
Skill: Concept
Objective: 1
5) Major exporting countries typically invoice foreign customers in ________.
A) U.S. dollars
B) Japanese yen
C) its home currency
D) the foreign customer's currency
Answer: C
Diff: 1
Skill: Concept
Objective: 1
6) Thompson Exporters, a new exporting firm, provides a 5% discount to customers who use the
safest method of payment. Which method of payment most likely receives this discount?
A) payment in advance
B) open account
C) letter of credit
D) countertrade
Answer: A
Diff: 2
Skill: Application
Objective: 1
Learning Outcome: Discuss the factors influencing financial management decisions in
international business
7) Fulsom Exporting prefers that customers who pay in advance use a wire transfer. What is the
most likely reason for this preference?
A) protection from FDIC
B) immediate access to funds
C) minimal interest rates and fees
D) protection from currency fluctuation
Answer: B
Diff: 2
Skill: Application
Objective: 1
8) Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the
following forms of payment provides the most risk to Theresa?
A) letter of credit
B) wire transfer
C) open account
D) payment in advance
Answer: D
Diff: 2
Skill: Application
Objective: 1
9) Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the
following is most likely the safest for Theresa?
A) letter of credit
B) wire transfer
C) open account
D) payment in advance
Answer: C
Diff: 2
Skill: Application
Objective: 1
10) When paying via ________, the goods are shipped by the exporter and received by the
importer before payment, and the exporter then bills the importer for the goods, stipulating the
amount, form, and time at which payment is expected.
B) open account
C) letters of credit
D) countertrade
Answer: B
Diff: 2
Skill: Concept
Objective: 1
11) Why would an exporter most likely consider an open account undesirable?
A) high fees from host country governments
B) heavy reliance on financial institutions
C) significant paperwork required
D) working capital tied up
Answer: D
Diff: 3
Skill: Concept
Objective: 1
12) In specialized international lending activity, firms may engage in ________, where they buy
foreign accounts receivable at a discount from face value.
A) factoring
B) lading
C) documentary collecting
D) financial drafting
Answer: A
Diff: 2
Skill: Concept
Objective: 1
13) Janson Enterprises, a U.S. firm, is exporting medical equipment to an Indonesian firm that
has poor credit. Which method of payment would Janson most likely prefer?
B) open account
C) letter of credit
D) credit card
Answer: A
Diff: 2
Skill: Application
Objective: 1
14) What document serves as a title to the goods in question under the document collection
payment method?
A) sight draft
B) bill of lading
C) bill of exchange
D) trade acceptance
Answer: B
Diff: 2
Skill: Concept
Objective: 1
15) FedEx provided Lewis Exporters with a document that serves as a contract for transporting
twenty boxes from Boston to Paris. Which term best describes this document?
A) sight draft
B) bill of lading
C) bill of exchange
D) trade acceptance
Answer: B
Diff: 2
Skill: Application
Objective: 1
16) A ________ requires payment upon the transfer of title to the goods from the exporter to the
importer.
A) sight draft
B) time draft
C) bill of lading
D) bill of exchange
Answer: A
Diff: 2
Skill: Concept
Objective: 1
17) A ________ extends credit to the importer by requiring payment at some specified time after
the importer receives the goods.
A) sight draft
B) time draft
C) bill of lading
D) bill of exchange
Answer: B
Diff: 2
Skill: Concept
Objective: 1
18) An accepted time draft is called a ________.

A) sight draft
B) bill of lading
C) bill of exchange
D) trade acceptance
Answer: D
Diff: 1
Skill: Concept
Objective: 1
19) When acceptances are sold ________, it means that the buyer of the acceptance is stuck with
the loss if the importer does not pay.
A) without recourse
B) with recourse
C) with pay
D) without pay
Answer: A
Diff: 1
Skill: Concept
Objective: 1
20) ________ are considered less risky and are usually discounted less than ________.
A) Letters of credit; bills of exchange
B) Trade acceptances; bills of lading
C) Banker's acceptances; trade acceptances
D) Bills of exchange; banker's acceptances
Answer: C
Diff: 3
Skill: Concept
Objective: 1
21) When acceptances are sold ________, it means that the exporter will have to reimburse the
buyer of the acceptance in the case of nonpayment by the importer.
A) without recourse
B) with recourse
C) with pay
D) without pay
Answer: B
Diff: 2
Skill: Concept
Objective: 1
22) Which document is issued by a bank and contains its promise to pay the exporter on
receiving proof that the exporter has fulfilled all requirements specified in the document?
A) bill of lading
B) bill of exchange
C) letter of credit
D) trade acceptance
Answer: C
Diff: 2
Skill: Concept
Objective: 1
23) A(n) ________ confirms that the goods being shipped were produced in the exporting
country.
A) export license
B) certificate of product origin
C) inspection certificate
D) bill of lading
Answer: B
Diff: 1
Skill: Concept
Objective: 1
24) A(n) ________ provides assurance that the products have been checked by authorities and
that they conform to relevant standards.
A) certificate of product origin
B) inspection certificate
C) trade acceptance
D) bill of lading
Answer: B
Diff: 1
Skill: Concept
Objective: 1
25) After issuing the letter of credit, the importer's bank sends it and the accompanying
documents to the exporter's bank, which advises the exporter of the terms of the instrument,
thereby creating a(n) ________.
A) advised letter of credit
B) confirmed letter of credit
C) irrevocable letter of credit
D) revocable letter of credit
Answer: A
Diff: 2
Skill: Application
Objective: 1
26) Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of
credit, which creates a(n) ________.
D) unconfirmed letter of credit
Answer: B
Diff: 2
Skill: Application
Objective: 1
27) The ________ is a letter of credit that cannot be altered without the written consent of both
the importer and the exporter.
Answer: C
Diff: 1
Skill: Concept
Objective: 1
28) The ________ is a letter of credit that the bank may alter at any time and for any reason.
Answer: D
Diff: 1
Skill: Concept
Objective: 1
29) Credit card companies collect ________ from the merchant for assuming the costs of
collecting the funds from the customer and any risks of nonpayment.
A) flat fees
B) transaction fees
C) translation fees
D) floating fees
Answer: B
Diff: 1
Skill: Concept
Objective: 1
30) Columbus Trading agrees to exchange coffee and rice to Romania in return for machinery.
Which term best describes this transaction?
A) countertrade
B) in-kind payment
C) open account payment
D) documentary collection
Answer: A
Diff: 2
Skill: Application
Objective: 1
31) What is the simplest form of countertrade?

A) barter
B) parallel barter
C) offset purchase
D) clearinghouse accounts
Answer: A
Diff: 2
Skill: Concept
Objective: 1
32) The State Trading Corporation of India agreed to exchange wheat and other grains to
Turkmenistan in return for cotton. What form of countertrade is this?
A) counterpurchase
B) barter
C) parallel barter
D) offset purchase
Answer: B
Diff: 2
Skill: Application
Objective: 1
33) What is the most common form of countertrade?
A) barter
B) offset purchase
C) counterpurchase
Answer: C
Diff: 2
Skill: Concept
Objective: 1
34) Which form of countertrade is used when each party simultaneously swaps its products for
the products of the other?
A) barter
B) parallel barter
C) offset purchase
Answer: A
Diff: 2
Skill: Concept
Objective: 1
35) Japan's Fukusuke Corporation sold 10 knitting machines and raw materials to Chinatex, a
Shanghai-based clothing manufacturer in exchange for one million pairs of underwear to be
produced on the knitting machines. What form of countertrade is this?
A) buy-back
B) parallel barter
C) offset purchase
Answer: A
Diff: 2
Skill: Application
Objective: 1
36) Company X sold its products to Company Z in September. Company X will be compensated
with Company Z's products in December. Which term best describes this transaction?
A) offset purchase
B) parallel switch
C) counterpurchase
Answer: C
Diff: 2
Skill: Application
Objective: 1
37) A sogo shosha might assist in the sale of Mitsubishi trucks in Ghana, taking payment in
cocoa, which then can be sold to keiretsu-linked food processors back in Japan or to independent
candy makers anywhere. This is an example of ________.
A) counterpurchase
B) switching arrangements
C) offset purchase
Answer: B
Diff: 2
Skill: Application
Objective: 1
38) Which form of countertrade involves compensation arrangements whereby one firm sells
capital goods to a second firm and is compensated in the form of output generated as a result of
their use?
A) buy-back
B) parallel barter
C) offset purchase
Answer: A
Diff: 2
Skill: Concept
Objective: 1
39) Which form of countertrade is used when part of an exported good is produced in the
importing country?
A) barter
B) counterpurchase
C) offset purchase
Answer: C
Diff: 2
Skill: Concept
Objective: 1
40) Which term refers to an accounting system used to facilitate international countertrade that
requires a firm to balance its overall countertrade transactions but not any single countertrade
transaction?
A) open accounts
B) parallel barters
C) offset purchases
Answer: D
Diff: 1
Skill: Concept
Objective: 1
41) Countertrade is primarily important to countries that lack ________.
A) foreign trade zones
B) convertible currencies
C) greenfield investments
D) democratic governments
Answer: B
Diff: 2
Skill: Concept
Objective: 1
42) Why does Eximbank offer a working capital guarantee loan program?
A) promote foreign imports
B) encourage U.S. exports
C) protect emerging economies
D) encourage trade in U.S. dollars
Answer: B
Diff: 3
Skill: Concept
Objective: 1
43) What is the primary risk an exporter faces with documentary collection?
A) bank changing terms
B) importer defaulting
C) issuing bank defaulting
D) importer failing to pay account balance
Answer: B
Diff: 2
Skill: Concept
Objective: 1
44) Which payment method is appropriate when the exporter has complete trust in the importer?
B) open account
C) letter of credit
D) countertrade
Answer: B
Diff: 2
Skill: Concept
Objective: 1
45) Which of the following is not a type of foreign-exchange exposure?

A) transaction exposure
B) currency conversion
C) translation exposure
D) economic exposure
Answer: B
Diff: 2
Skill: Concept
Objective: 2
46) ________ occurs when exchange rate movements that occur after the firm is legally
obligated to complete the transaction can affect the financial benefits and costs of an
international transaction.
A) Exchange rate risk
B) Transaction exposure
C) Translation exposure
D) Currency conversion risk
Answer: B
Diff: 2
Skill: Concept
Objective: 2
47) The purchase of goods, services, or assets denominated in a foreign currency most likely
leads to ________.
A) exchange rate risk
B) translation exposure
C) transaction exposure
D) currency conversion risk
Answer: C
Diff: 1
Skill: Concept
Objective: 2
48) Which of the following is not a type of transaction that could lead to transaction exposure?
A) the sale of goods, services, or assets
B) extension of credit
C) a balance sheet hedge
D) borrowing of money
Answer: C
Diff: 2
Skill: Concept
Objective: 2
49) Which of the following strategies offers firms the potential for capital gain if the home
currency rises in value?
A) buying a forward currency
B) buying a currency option
C) acquiring offsetting assets
D) going naked
Answer: D
Diff: 2
Skill: Concept
Objective: 2
50) Which of the following strategies could result in a lost opportunity for capital gain if the
home currency rises in value?
A) buying a forward currency
B) buying a currency option
C) acquiring offsetting assets
D) buying a currency future
Answer: B
Diff: 2
Skill: Concept
Objective: 2
51) ________ is the impact on the firm's consolidated financial statements of fluctuations in
exchange rates that change the value of foreign subsidiaries as measured in the parent's currency.
A) Exchange rate risk
B) Transaction exposure
C) Translation exposure
D) Currency conversion risk
Answer: C
Diff: 2
Skill: Concept
Objective: 2
52) How can firms reduce their translation exposure?
A) go naked
B) use a balance sheet hedge
C) buy forward currency
D) acquire an offsetting asset
Answer: B
Diff: 2
Skill: Concept
Objective: 2
53) A(n) ________ is created when an international firm matches its assets denominated in a
given currency with its liabilities denominated in that same currency.
A) offsetting asset
B) income statement hedge
C) balance sheet hedge
D) cash account
Answer: C
Diff: 2
Skill: Concept
Objective: 2
54) Megan, a financial manager at Price Manufacturing, an MNE, strives to minimize the firm's
working capital balances. Why would this most likely be important for Price Manufacturing?
A) Subsidiaries need working capital in host-country currencies.
B) Working capital has an increased foreign-exchange risk.
C) Working capital earns a very low rate of return.
D) Working capital is highly taxed overseas.
Answer: C
Diff: 3
Skill: Application
Objective: 3
55) When two subsidiaries net out their mutual invoices, it is known as ________.
A) bilateral netting
B) centralized cash management
C) an operational hedge
D) a balance sheet hedge
Answer: A
Diff: 2
Skill: Application
Objective: 3
56) A leads and lags strategy is typically implemented by financial managers to minimize
________.
A) macropolitical risks
B) foreign-exchange risks
C) working capital balances
D) currency conversion costs
Answer: B
Diff: 2
Skill: Concept
Objective: 3
57) Which of the following is one of the commonly used methods for evaluating investment
projects among international financial officers?
A) net future value
B) external rate of return
C) payback period
D) return on equity
Answer: C
Diff: 2
Skill: Concept
Objective: 4
58) KLM Royal Dutch Airlines is considering an investment in new routes that should bring in
significant revenues in the future. Which of the following will KLM most likely evaluate to
determine the value of the investment?
A) external rate of return
B) net present value
C) foreign exchange
D) natural hedge
Answer: B
Diff: 2
Skill: Application
Objective: 4
59) Karcher Enterprises, an MNE, is considering building a new factory overseas but has not
determined the best location. Which of the following potential locations would require Karcher
Enterprises to make the largest risk adjustment?
A) Syria
B) India
C) Japan
D) Mexico
Answer: A
Diff: 2
Skill: Application
Objective: 4
60) Ford Motor Company is considering a cash investment in a joint venture with Hyundai in
South Korea. Ford considers the number of years it will take the firm to recover the original cash
investment from the project's earnings, which is called the ________.
A) internal rate of return
C) payback period
D) return on equity
Answer: C
Diff: 2
Skill: Application
Objective: 4
61) The ________ is the number of years it will take the firm to recover the original cash
investment from the project's earnings.
A) internal rate of return
C) payback period
D) return on equity
Answer: C
Diff: 1
Skill: Concept
Objective: 4
62) The minimum rate of return the firm finds acceptable for its capital investments is called the
________.
A) hurdle rate
B) internal rate of return
C) return on investment
D) saturation rate
Answer: A
Diff: 2
Skill: Concept
Objective: 4
63) Rubbermaid has set a minimum rate of return of 15 percent on all its capital investments.
Fifteen percent is Rubbermaid's ________.
A) payback period
B) hurdle rate
C) internal rate of return
D) return on investment
Answer: B
Diff: 2
Skill: Application
Objective: 4
64) The price paid for goods and services in intracorporate transfers is the ________.
A) hurdle rate
C) transfer price
D) swap price
Answer: C
Diff: 1
Skill: Concept
Objective: 5
65) Financial managers at Parker Computers, an MNC, want to decrease the tariffs paid on
components imported from Parker's subsidiaries. Which of the following would most likely
accomplish this goal?
A) increasing the internal rate of return offered by the subsidiaries
B) lowering the transfer price charged by the subsidiaries
C) engaging in currency swaps with the subsidiaries
D) raising the transfer prices paid by the subsidiaries
Answer: B
Diff: 3
Objective: 5
66) Which of the following is a common characteristic of a tax haven?

A) sophisticated banking system
B) stringent judicial oversight
C) flexible transit tariff system
D) moderate income tax rates
Answer: A
Diff: 2
Skill: Concept
Objective: 5
Chapter 19 International Human Resource Management and Labor Relations
1) ________ is the set of activities directed at attracting, developing, and maintaining the
effective workforce necessary to achieve a firm's objectives.
A) Labor selection
B) Employee development
C) Human resource management
D) Strategic operations implementation
Answer: C
Diff: 1
Skill: Concept
Objective: 1
2) Why do international HR managers most likely need to adjust hiring, firing, and training
methods on a country-by-country basis?
A) ensure compensation equity
B) comply with international laws
C) adjust for national and cultural differences
D) meet requirements of joint venture contracts
Answer: C
Diff: 2
Skill: Concept
Objective: 1
Learning Outcome: Identify and discuss the components of the global human resources
management process
3) Which of the following most likely constrains the hiring practices and compensation systems
of international firms operating in foreign locations?
A) local laws
B) capital budgeting
C) benefits availability
D) practices of competing firms
Answer: A
Diff: 2
Skill: Concept
Objective: 1
4) What is the first step in the international human resource management process?
A) training and development
B) performance appraisal
C) define business skills necessary for the job
D) compensation and benefits
Answer: C
Diff: 2
Skill: Concept
Objective: 1
management process
5) After training and development takes place, what comes next in the international human
resource management process?
A) contribution to organizational effectiveness
C) compensation and benefits
D) labor relations
Answer: B
Diff: 2
Skill: Concept
Objective: 1
management process
6) What is most important in staffing managerial employees?

A) differences in cultural conditions
B) legal differences
C) strategic and development issues
D) political differences
Answer: C
Diff: 2
Skill: Concept
Objective: 1
management process
7) At which stage in the evolution of a firm's organizational structure are international staffing
needs lowest?
A) export department
B) international division
C) global organization
D) matrix organization
Answer: A
Diff: 1
Skill: Concept
Objective: 1
8) Pet Comfort Systems is a firm based in Chicago that has just started exporting a small number
of pet beds to retail stores in London, Tokyo, and Paris. The export department manager at Pet
Comfort Systems is most likely from which country?
A) England
B) Japan
C) France
D) U.S.
Answer: D
Diff: 2
Skill: Application
Objective: 1
9) A firm's international division is usually located in ________.

A) the home country
B) the importing country
C) a centrally located country
D) the country with the highest foreign sales
Answer: A
Diff: 2
Skill: Concept
Objective: 1
10) Who typically heads up an international division?

A) third country nationals
B) host country nationals
C) parent country nationals
D) primary country nationals
Answer: C
Diff: 2
Skill: Concept
Objective: 1
11) TechWare, an MNE based in Canada, has foreign operations in Singapore and Tokyo.
TechWare's foreign offices are managed by parent country nationals. What is the most likely
advantage of this staffing policy?
A) develops community ties
B) generates innovative ideas
C) minimizes costs of relocating managers
D) facilitates communication with headquarters
Answer: D
Diff: 2
Skill: Application
Objective: 1
12) Using ________ will most likely improve a subsidiary's ability to adjust to changes in local
economic and political conditions.
A) parent country nationals
C) third country nationals
D) home country nationals
Answer: B
Diff: 2
Skill: Concept
Objective: 1
13) PDF Enterprises, an MNE, uses a centralized approach to management, so its international
managers will most likely be ________.
A) home country nationals
Answer: A
Diff: 2
Skill: Application
Objective: 1
14) What is a disadvantage of using host country nationals to manage foreign operations?
A) high relocation costs to firm
B) unfamiliarity with firm's practices
C) loss of key talent from headquarters
D) inability to understand local customs
Answer: B
Diff: 2
Skill: Concept
Objective: 1
15) Companies that view themselves as multidomestic are more likely to ________.
A) provide visas to third country nationals
B) decentralize decision making
C) employ parent country nationals
D) centralize decision making
Answer: B
Diff: 2
Skill: Concept
Objective: 1
16) ________ are residents of the international business's home country.
A) Parent country nationals
B) Host country nationals
C) Third country nationals
D) Primary country nationals
Answer: A
Diff: 1
Skill: Concept
Objective: 1
17) Mercedes hired managers from the local community as operations managers in its Kentucky
plant. Mercedes used ________.
Answer: B
Diff: 2
Skill: Application
Objective: 1
18) ________ are employees who are not citizens of the firm's home country or of the host
country.
A) Parent country nationals
B) Locals
C) Third country nationals
D) Expatriates
Answer: C
Diff: 1
Skill: Concept
Objective: 1
19) What term refers to people working and residing in countries other than their native country?
A) host country national
B) expatriate
C) nonpatriot
D) green card resident
Answer: B
Diff: 1
Skill: Concept
Objective: 1
20) Michael is a United States citizen who was sent from the U.S. headquarters to Italy to
oversee procedural changes in one of the corporation's manufacturing subsidiaries. Michael is
a(n) ________.
A) parent country national
B) host country national
C) third country national
D) primary country national
Answer: A
Diff: 2
Skill: Application
Objective: 1
21) Mick is a native of South Africa. He works for Octagon, a British MNC, at the firm's Tokyo
branch. Mick is best described as a(n) ________.
C) home country national
D) third country national
Answer: D
Diff: 2
Skill: Application
Objective: 1
22) Firms using a(n) ________ primarily use parent country nationals to staff higher-level
foreign positions.
A) ethnocentric staffing model
B) polycentric staffing model
C) geocentric staffing model
D) monocentric staffing model
Answer: A
Diff: 2
Skill: Concept
Objective: 1
23) Samsung tends to follow an ethnocentric staffing model. From which group will it most
likely hire for upper-level management positions?
Answer: A
Diff: 2
Skill: Application
Objective: 1
24) Which type of manager would most likely be employed to promote a global outlook through
the firm's operations?
C) third country national
D) home country national
Answer: C
Diff: 2
Skill: Concept
Objective: 1
25) ATX Electronics, an MNC, typically fills high-level foreign positions with host country
nationals. Which staffing model is most likely used by ATX Electronics?
A) ethnocentric staffing model
B) polycentric staffing model
C) geocentric staffing model
D) monocentric staffing model
Answer: B
Diff: 2
Skill: Application
Objective: 1
26) Firms using a geocentric staffing model are primarily concerned with ________.
A) ensuring that home office views and policies are maintained
B) gaining support and assistance from local communities
C) hiring the best person available regardless of nationality
D) employing local managers with technical expertise
Answer: C
Diff: 3
Skill: Concept
Objective: 1
27) Why is the geocentric staffing approach encouraged by the European Union?
A) protect currency rates
B) promote worker mobility
C) ensure consensus building
D) maintain reasonable wage rates
Answer: B
Diff: 2
Skill: Concept
Objective: 1
28) Japanese firms have a tendency to ________.
A) reserve top positions for Japanese managers
B) fill foreign management positions too quickly
C) ignore nationality when filling management positions
D) employ only non-Japanese managers for foreign positions
Answer: A
Diff: 2
Skill: Concept
Objective: 1
29) Ballston Manufacturing, an MNC, adheres to an ethnocentric staffing approach when filling
senior-level positions for its foreign locations. As a result, Ballston most likely devotes
significant resources to ________.
A) distributing products
B) building effective supply chains
C) selecting and training expatriate managers
D) determining compensation for local employees
Answer: C
Diff: 3
AACSB: Analytical Thinking
Skill: Synthesis
Objective: 1, 2
management process
30) Which of the following is frequently asked by MNCs to fill short-term foreign assignments?
A) interns
B) headhunters
C) retired executives
D) new college graduates
Answer: C
Diff: 1
Skill: Concept
Objective: 2
31) Tanya's job requires her to actively seek qualified managers to fill positions in other
organizations. Tanya is most likely a(n) ________.
A) expatriate
B) headhunter
C) foreign marketer
D) manufacturers' agent
Answer: B
Diff: 1
Skill: Application
Objective: 2
32) ________ is the early return of an expatriate manager to the home country because of an
inability to perform in the overseas assignment.
A) Culture shock
B) Expatriate return
C) Expatriate failure
D) Managerial incompetence
Answer: C
Diff: 1
Skill: Concept
Objective: 2
33) Which country has the highest expatriate failure rates?

A) South Korea
C) Germany
D) Japan
Answer: B
Diff: 2
Skill: Concept
Objective: 2
34) What is the primary reason for high expatriate turnover rates among U.S. firms?
A) difficulty with communication
B) lack of adequate compensation
C) problems adjusting to the location
D) inability to remain on a career track
Answer: C
Diff: 2
Skill: Synthesis
Objective: 2, 5
management process
35) Maria, an HR manager at PolyTech, an MNE based in Canada, has been given the task of
determining the best candidates for a managerial position at the firm's Tokyo facility. Which tool
would help Maria the most in this task?
A) self-assessment checklist
C) subordinate evaluation
D) risk assessment
Answer: A
Diff: 2
Skill: Application
Objective: 2
management process
36) ________ is a psychological phenomenon that may lead to feelings of fear, helplessness,
irritability, and disorientation.
A) Expatriate failure
B) Repatriation
C) Culture shock
D) Depression
Answer: C
Diff: 2
Skill: Concept
Objective: 1
37) John has been transferred to an office in Japan for a year. In his first few weeks, he began to
feel confused and rejected as well as a sort of mourning for home. John is experiencing
________.
A) expatriate failure
B) repatriation
C) acculturation
D) culture shock
Answer: D
Diff: 2
Skill: Application
Objective: 2
38) Which of the following is a phase in the process of acculturation?

A) honeymoon
B) acceptance
C) acquiescence
D) anti-culturalism
Answer: A
Diff: 2
Skill: Concept
Objective: 2
management process
39) The average US expatriate costs the employer about ________ per year.
A) $3,000
B) $30,000
C) $100,000
D) $300,000
Answer: B
Diff: 2
Skill: Concept
Objective: 3
40) Which method can reduce the level of culture shock an expatriate is likely to experience?
A) predeparture language training
B) increased foreign compensation
C) initial long-term assignments
D) personality testing
Answer: A
Diff: 2
Skill: Concept
Objective: 2
management process
41) For years, some foreign firms hesitated to send women managers on foreign assignments to
countries, such as ________, because the firms assumed the women would not be accepted in the
culture that frowned on women working outside the home.
A) Canada
B) England
C) France
D) Japan
Answer: D
Diff: 2
Skill: Concept
Objective: 2
42) The prominent cause of expatriate failure is ________.

A) a lack of financial resources
B) dietary problems in a new location
C) failure of the family to adjust
D) language barriers
Answer: C
Diff: 2
Skill: Concept
Objective: 2
43) According to the text, prohibitions against gender discrimination in US equal employment
opportunity law conflict with ________ customs and laws regarding the roles, rights, and
privileges of women.
A) Mexican
B) German
C) Saudi Arabian
D) Brazilian
Answer: C
Diff: 2
Skill: Concept
Objective: 6
44) ________ workers are production workers.
A) White collar
B) White hat
C) Red shirt
D) Blue collar
Answer: D
Diff: 1
Skill: Concept
Objective: 1
45) ________ workers are office staff.

A) White collar
B) Red shirt
C) Blue collar
D) Green
Answer: A
Diff: 1
Skill: Concept
Objective: 1
46) ________ refers to bringing a manager back home after a foreign assignment has been
completed.
A) Expatriation
B) Repatriation
C) Expatriate failure
D) Acculturation
Answer: B
Diff: 1
Skill: Concept
Objective: 2
management process
47) Dawson Enterprises, an MNE, has experienced numerous expatriation and repatriation
problems in recent years. Which of the following activities would most likely increase the
success rate of overseas assignments at Dawson?
A) providing expatriates with generous travel and housing stipends
B) ensuring that only unmarried managers are sent overseas
C) assigning mentors in the home office to expatriates
D) assigning new college recruits to foreign positions
Answer: C
Diff: 3
Skill: Application
Objective: 2
management process
48) Which term refers to instruction directed at enhancing specific job-related skills and
abilities?
A) training
B) development
C) screening
D) selection
Answer: A
Diff: 1
Skill: Concept
Objective: 3
management process
49) ________ is general education concerned with preparing managers for new assignments
and/or higher-level positions.
A) Training
B) Development
C) Screening
D) Practicing
Answer: B
Diff: 1
Skill: Concept
Objective: 3
management process
50) According to research, what is the primary barrier to a firm's successful entry into a foreign
market?
A) lack of information
B) lack of foreign partners
C) lack of international talent
D) lack of knowledge about foreign customers
Answer: D
Diff: 2
Skill: Concept
Objective: 3
51) What is a benefit of using customized training programs?
A) keep costs to a minimum
B) enable retention assessment
C) precise and essential information
D) monitor cultural effectiveness
Answer: C
Diff: 2
Skill: Concept
Objective: 3
management process
52) Which instructional method allows global employees to access training materials when
convenient?
A) classroom lectures
B) assessment centers
C) multimedia methods
D) role-playing activities
Answer: C
Diff: 1
Skill: Concept
Objective: 3
53) A ________ is the process of determining how effectively people are performing their jobs.
A) performance appraisal
B) job review
C) job audit
D) developmental audit
Answer: A
Diff: 1
Skill: Concept
Objective: 4
54) Expatriate managers generally receive differential compensation to make up for dramatic
differences in ________.
A) technical responsibilities
B) standards of living
C) travel demands
D) healthcare
Answer: B
Diff: 2
Skill: Concept
Objective: 4
management process
55) The idea that a manager who accepts a foreign assignment is entitled to the same standard of
living the manager enjoyed at home is the basis for ________.
A) premium expatriate salaries
B) cost-of-living allowances
C) hardship premiums
D) tax equalization
Answer: B
Diff: 2
Skill: Concept
Objective: 4
management process
56) Smith Enterprises seeks to entice one of its star managers to move to Iraq to oversee its
negotiations for Iraqi oil. The firm will likely need to offer a ________ to a manager's base
salary.
A) cost-of-living allowance
B) bonus
C) hardship premium
D) tax equalization adjustment
Answer: C
Diff: 2
Skill: Application
Objective: 4
management process
57) A(n) ________ is a means of ensuring that the expatriate's after-tax income in the host
country is similar to what the person's after-tax income would be in the home country.
A) tax assessment system
B) tax equalization system
C) hardship premium
D) foreign-service premium
Answer: B
Diff: 1
Skill: Concept
Objective: 4
management process
58) According to surveys, which of the following is the most expensive city for expatriates?
A) New York
B) Barcelona
C) Tokyo
D) London
Answer: C
Diff: 1
Skill: Concept
Objective: 4
59) ________ is the extent to which a firm is able to keep valued employees.
A) Turnover
B) Retention
C) Repatriation
D) Compensation
Answer: B
Diff: 1
Skill: Concept
Objective: 5
60) ________ is the rate at which people leave a firm.

A) Turnover
B) Retention
C) Repatriation
D) Transition
Answer: A
Diff: 1
Skill: Concept
Objective: 5
61) After five years working as a manager at Water Sound Enterprises, Jeff has decided to quit.
On his last day at work, Jeff is interviewed by the HR manager and asked his reasons for leaving
Water Sound. Jeff is most likely participating in a(n) ________ interview.
A) outsourcing
B) selection
C) screening
D) exit
Answer: D
Diff: 2
Skill: Application
Objective: 4
62) In most international firms' foreign operations, nonmanagerial employees are ________.
A) home country nationals
D) parent country nationals
Answer: B
Diff: 2
Skill: Concept
Objective: 6
63) Barton Manufacturing is considering the idea of capitalizing on inexpensive labor in Mexico
by moving the firm's production facilities from Detroit to Mexico City. The firm manufactures
complex circuit boards. To ensure high productivity, Barton will most likely need to invest
heavily in which of the following?
A) workforce training
B) healthcare benefits
C) vertical integration
D) diversification
Answer: A
Diff: 2
Skill: Application
Objective: 6
management process
64) What factor is most important when determining compensation for nonmanagerial
employees in a firm's foreign facility?
A) home country standards
B) international averages
C) appraisal systems
D) local norms
Answer: D
Diff: 2
Skill: Concept
Objective: 6
management process
65) Which term refers to the process used to make agreements between management and labor
unions?
A) labor management
B) collective bargaining
C) negotiations
D) labor allowances
Answer: B
Diff: 1
Skill: Concept
Objective: 7
66) ________ refers to the requirement in Germany that unions have input into how firms are
run.
A) Codetermination
B) Collective bargaining
C) Workers' rights
D) Union power
Answer: A
Diff: 1
Skill: Concept
Objective: 7
67) Which of the following is a characteristic of labor unions in Europe?

A) avoiding hostile actions towards employers
B) relying on regulations to protect wage rates
C) using work stoppages to gain public support
D) involving third-party mediators to settle grievances
Answer: C
Diff: 2
Skill: Concept
Objective: 7
68) Which of the following is a EU policy that promotes common job-related benefits and
working conditions throughout the EU?
A) fixed alliance
B) social charter
C) statutory law
D) codetermination
Answer: B
Diff: 2
Skill: Concept
Objective: 7

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International Business, 8e (Griffin/Pustay)

Chapter 1 An Overview of International Business

2) Which of the following would be considered an international business transaction?

5) Individuals should most likely study international business to ________.

7) Just-in-time systems were created in ________.

8) Just-in-time systems are used by firms to ________.

19) Which term refers to the location of a parent company's headquarters?

20) If a company is headquartered in Taiwan, then Taiwan is the company's ________.

22) The ________ is where a company operates but is not headquartered.

24) Trade between nations can be traced back as far as ________.

32) Licensing usually involves permission to use which of the following?

37) The International Red Cross is an example of a(n) ________.

38) Which of the following is a common activity of MNCs?

40) International nonprofit organizations are called ________.

45) A ________ is a distinctive strength that is central to a firm's operations.

52) Which of the following is considered a BRIC nation?

64) International business originally consisted of ________.

1) One likely consequence of the diminishing Arctic ice cap is ________.

2) Which of the following is a member of the Arctic Council?

3) Approximately ________ of the world's current economic activity is concentrated in North

6) What is London's origin as a world financial center?

16) Which country listed below commonly attracts flight capital?

19) Which of the following is true of Mexico?

20) ________ is the dominant market for Canadian goods.

24) The European Union is comprised of ________ countries.

30) What country holds the world's largest land mass?

31) Who was Russia's first democratically elected president?

32) The Newly Independent States refers to the ________.

34) Russia's major natural resources include which of the following?

36) The Japanese term sogo shosha refers to a(n) ________.

43) The World Bank classifies the Four Tigers as ________.

47) The Republic of China is most commonly known as ________.

50) Because of its excellent port facilities, Singapore thrives on ________.

51) ________ is the world's most populous country.

52) India was a colony of which country?

59) What region is sometimes called the cradle of civilization?

68) The world's most populous Spanish-speaking nation is ________.

1) Statutory law is primarily based on ________.

2) Common law is primarily based on ________.

3) Civil law is primarily based on ________.

4) Religious law is primarily based on ________.

6) Which of the following is a foundation for legal systems?

10) The foundation of the legal system in China is ________.

11) ________ is based on a codification of what is and is not permissible.

12) ________ is law enacted by legislative action.

14) Civil law originated in biblical times with the ________.

20) ________ operates under bureaucratic law.

24) A country restricting access to high-technology goods or withdrawing preferential tariff

31) Extraterritoriality refers to ________.

34) Privatization is ________.

36) In which industry does Mexico restrict foreign ownership?

50) Which country has the highest rate of software piracy?

54) Accounting reserves ________.

63) ________ has one of the highest levels of macropolitical risk.

2) In which country is nepotism valued?

4) From what source do cultural changes usually occur?

5) Social structure is best defined as the ________.

6) Which of the following is not a component of social structure?