CHAPTER 5

35. Government stability refers to all but one of the following of a government:

A. policies, that they endure over

time.
B. ability to keep itself in
power.
C. ability to hold to predictable fiscal, monetary, and political
policies.
D. ability to adjust to sudden changes by making radical policy
changes.

All of these choices except the ability to adjust to sudden changes by making
radical policy changes refer to attributes of government stability.

39. Arguments for trade restrictions include all but

A. national defense, infant industry, and job

protection.
B. punishment of offending
nations.
C. fair competition and
retaliation.
D. sovereignty
rights.

All of these arguments are used to justify trade restrictions except sovereignty rights.

40. Dumping is

A. selling a product abroad for less than its production cost or cost in the home
market.
B. selling a product abroad tax-free and with an extended
warrantee.
C. exporting a product to a third country without correct
documentation.
D. selling a product at its domestic market
value.

Selling a product abroad for less than its production cost or cost in the home market is
the WTO definition of dumping.
47. The primary motivation of tariffs is to

A. raise government revenue at the cost of

importers.
B. raise the price of imports, to protect domestic
goods.
C. punish countries over political
issues.
D. encourage foreign
consumption.

Tariffs are primarily used to raise the cost of imported goods.

53. Quotas are a quantitative barrier that sets

A. limits, established by the

importer.
B. goals, established by the
exporter.
C. precise quantities of imports or exports, based on
price.
D. expectations on domestic and foreign
sales.

Quotas usually are enforced by the importing nation.

54. Transshipping is used to

A. reduce shipping costs, as a form of

consolidation.
B. avoid import
administration.
C. evade allocated
quotas.
D. evade local manufacture
requirements.

Transshipping is discussed in this module as a way to get around filled quotas in a

country.

57. Unlike quotas, voluntary export restraints (VERs) are imposed by

A. the importing country’s

government.
B. the exporting country’s
government.
C. either the importing or exporting country’s government; what matters is that
they are voluntary.
D. the importing
company.

Although quotas are applied by the importing country, VERs are applied by the
exporting country.

59. Non-quantitative nontariff barriers

73. Nuisance tariffs

A. require importers to go through the administrative paperwork, even for a small

payment.
B. can be declined at the point of
import.
C. are used to activate larger duty payments related to
quantity.
D. can be paid in
kind.

This is the case; the cost of the paperwork may exceed the cost of the tariff.

CHAPTER 6
63. Intellectual property includes

A. intangibles, which is why it is a difficult

area.
B. thoughts and ideas, but not tangible
products.
C. anything that is a result of a creative process that does not have material
qualities.
D. anything that is the result of things created using someone's
intellect.

IP includes all results of the intellect, whether tangible or intangible.

67. Patent trolling is a process of

A. looking for loopholes in patent protection and exploiting

them.
B. recording and registering of patents in foreign countries to protect the
firm's IP.
C. searching out patents that have expired and negotiating their
replacements.
D. legal research that uncovers obscure, deceased patent holders and liberates
their inventions.

Patent trolls look for loopholes in patents and attempt to exploit them.

77. The end result of legal trade obstacles is often

A. limited trade, with the recipient of the trade obstacles

withdrawing.
B. political negotiations between the two countries, to smooth relations and
reduce costs.
C. higher costs to
consumers.
D. lower taxes to citizens in the tariff-imposing country due to tariff
revenues.

Trade obstacles lead to higher costs to the consumers.

87. Arbitration is

A. often preferred by foreign litigants in the U.S., for speed and

privacy.
B. avoided by foreign litigants because it is costly and perceived to be
biased.
C. a way to increase the likelihood of a partial
ruling.
D. a favored forum for foreign divorce in the
 U.S.

Foreign litigants prefer arbitration in the U.S. for its privacy and speed.
89. Trade obstacles can take the form of

A. political, financial, or legal

regulations.
B. financial or economic
regulations.
C. economic or environmental
regulations.
D. marine safety rules and import
duties.

Trade obstacles can be political, financial, or legal in their origins. A boycott is

political, a tariff may be financial, and an antimonopoly regulation is legal.

93. Strict liability requires

A. no proof of the manufacturer's

negligence.
B. the manufacturer knows that the design or manufacture is
inferior.
C. the buyer to take risks on the purchase of a newly designed
product.
D. responsibility for the product throughout its life
cycle.

Strict liability makes the designer/manufacturer liable for damages caused by a

product without the need for a plaintiff to prove negligence in the product's
design or manufacture.

94. Punitive damages are found

A. throughout legal systems based on common

law.
B. only in the
U.S.
C. in the U.S., EU, and
Asia.
D. in both secular and religious-based legal
systems.

Punitive damages are awarded by juries in the U.S. and only in the U.S., where
huge damages can be levied against the defendant to "teach a lesson."

101. The source of most international law is

A. bilateral and multilateral treaties, many initiated by

the UN.
B. the World
Court.
35. The ________ includes all the uncontrollable forces originating outside the home
country that surround and influence the firm.
C. national law that is applied
extraterritorially.
D. waiting to be discovered, since the amount of international law is quite
A. foreign
limited.
environment
B. international
Most international law is a result of treaties, many of which have begun at the UN.
environment
C. host country
103. Civil law is based on
environment
D. global
environment
A. a collection of codes and tends to be
E. alien
bureaucratic.
environment
B. precedents found in judgments made by
judges.
The foreign environment includes all the uncontrollable forces originating outside the
C. an adversarial
home country thatunderstanding
surround and of the
influence the firm.
law.
D. codes combined with any religious law in the
area.

Civil law, such as Napoleonic law, is based on a collection of codes and tends to
not be adversarial.

CHAPTER 7
36. The ________ includes the interactions between domestic and foreign environmental
forces, or between sets of foreign environmental forces when an affiliate in one
country does business with customers in another.

A. foreign
environment
B. international
environment
C. host country
environment
D. global
environment
E. alien
environment

The international environment includes the interactions between domestic and foreign
environmental forces, or between sets of foreign environmental forces when an
affiliate in one country does business with customers in another.

39. _______ refers to the total value of all income generated by the residents of a
nation, including both the domestic production of goods and services and income
from abroad.

A. Gross domestic
product
B. Gross domestic
income
C. Gross national
income
D. Net national
product
E. Goods and services
income

Gross national income refers to the total value of all income generated by the
residents of a nation, including both the domestic production of goods and services
and income from abroad.
59. A measure of how a nation's income is apportioned among its people is

A. gross national
income.
B. gross domestic
product.
C. income
distribution.
D. the Atlas conversion
factor.
E. purchasing power
parity.

A measure of how a nation's income is apportioned among its people is income

distribution.

67. The amount of income left after paying taxes and making essential purchases is
known as

A. personal
savings.
B. discretionary
income.
C. personal
income.
D. disposable
income.
E. free cash
flow.

The amount of income left after paying taxes and making essential purchases is
known as discretionary income.
78. Unit labor costs will not rise in unison with wage rates if

A. the governments institute wage and price

controls.
B. productivity decreases faster than wages
increase.
C. the gains in productivity are greater than wage
increases.
D. interest rates rise less than wage
rates.
E. advertising costs
decline.

Unit labor costs will not rise in unison with compensation rates if gains in
productivity outstrip increases in hourly compensation. In fact, if productivity
increases fast enough, the unit costs of labor will decrease even though the firm is
required to pay workers more.

82. A large international debt may cause a government to

A. impose wage
controls.
B. increase government
spending.
C. eliminate price
controls.
D. restrict bankers' ability to issue
debt.
E. start a trade
war.

Governments with high debt may impose price controls (which make it difficult for
a subsidiary to earn a profit), cut government spending (which reduces company
sales), and impose wage controls (which limit consumer purchasing power).

CHAPTER 8

43. Purchasing power parity is a way to compare

A. the purchasing power of several

currencies.
B. tastes in several different
cultures.
C. the impact of financial aid in several
economies.
D. meals in different economic systems, via the Big Mac
Index.
PPP is a way to compare purchasing power across currencies.
47. Foreign reserves are used to

A. help foreigners who need additional

funds.
B. provide military support to foreign operations, e.g., the French Foreign Legion,
UN peacekeepers.
C. cover foreign debt, import purchases, and other demands for foreign currency
that banks might encounter.
D. support foreign operations that are branches but not
subsidiaries.

Foreign reserves are held to cover debt service, import costs, and other
transactions that are made in foreign currencies.

50. The inflation rate determines

A. a currency's
strengthening.
B. the real price of borrowing in capital
markets.
C. locations for
outsourcing.
D. import substitution
regimes.

Inflation rates determine the real price of borrowing in capital markets.

54. A vehicle currency is a currency

A. used to trade in the transportation sector, usually dollar, euro,

or yen.
B. whose value lies in its function in transfer
pricing.
C. specifically used in arbitrage deals as a trading
medium only.
D. used for international trade or
investment.

The U.S. dollar is often a vehicle currency, along with the yen and euro.

57. The international Fisher effect says that interest rate differentials

A. predict exchange rate

movement.
B. can be used to determine purchasing power
parity.
C. are an example of the law of one
price.
 D. illustrate Pareto
optimality.

The interest rate differentials for any two currencies reflect their expected change
in exchange rates.

59. The Fisher effect states that the real interest rate

A. is the nominal rate plus the recorded inflation

rate.
B. is the only measure to use in calculating
PPP.
C. is the nominal rate minus the expected inflation
rate.
D. is the difference between the nominal rate and the
inflation rate.

Interest rates vary to take into account differing rates of inflation.

73. Balance of payments data

A. reveal a country's
assets.
B. suggest areas of concern in monetary and fiscal
policy.
C. reveal demand for a country's
currency.
D. show how the country's currency arrangement (fixed, pegged, floating) is
valued.

The demand for currency is related to the balance of imports and exports.

CHAPTER 9
43. The process by which an organization determines where it is going in the future, how
it will get there, and how it will assess whether and to what extent it has achieved its
goals is known as

A. value chain
analysis.
B. scenario
analysis.
C. strategic
planning.
D. international
strategy.
E. competitive
advantage.

The process by which an organization determines where it is going in the future, how
it will get there, and how it will assess whether and to what extent it has achieved its
goals is strategic planning.

52. An assessment conducted on the chain of interlinked activities of an organization

or set of interconnected organizations, intended to determine where and to what
extent value is added to the final product or service is known as

A. economic value
added.
B. internal
analysis.
C. value chain
analysis.
D. SWOT
analysis.
E. competitive advantage
assessment.

As stated directly in the text, an assessment conducted on the chain of interlinked

activities of an organization or set of interconnected organizations, intended to
determine where and to what extent value is added to the final product or service
is known as value chain analysis.

55. The practices that organizations and their managers use for identifying, creating,
acquiring, developing, dispersing, and exploiting competitively valuable knowledge
is known as

A. competitive
advantage.
B. international
strategy.
C. value
analysis.
D. knowledge
 management.
E. internalizatio
n.

The practices that organizations and their managers use for identifying, creating,
acquiring, developing, dispersing, and exploiting competitively valuable knowledge
is known as knowledge management.
56. Knowledge that an individual has but that is difficult to express clearly in words,
pictures, or formulae, and therefore difficult to transmit to others is known as

A. explici
t.
B. implici
t.
C. tacit
.
D. intangibl
e.
E. valuabl
e.

Knowledge that an individual has but that is difficult to express clearly in words,
pictures, or formulae, and therefore difficult to transmit to others is known as tacit
knowledge.

59. A broad statement that defines the organization's purpose and scope is known as
a

A. strategic
plan.
B. mission
statement.
C. vision
statement.
D. values
statement.
E. value
chain.

A broad statement that defines the organization's purpose and scope is known as
a mission statement.

69. When a company faces relatively weak pressures for local responsiveness and cost
reductions, it should tend to use a

A. global
strategy.
B. multidomestic
strategy.
C. transnational
strategy.
D. differentiation
strategy.
E. home replication
strategy.
When a company faces relatively weak pressures for local responsiveness and cost
reductions, it should tend to use a home replication strategy.
71. When there is strong pressure for a company to adapt its products or services for
local markets, it should tend to use a

A. global
strategy.
B. multidomestic
strategy.
C. transitional
strategy.
D. differentiation
strategy.
E. home replication
strategy.

When there is strong pressure for a company to adapt its products or services for
local markets, it should tend to use a multidomestic strategy.

74. Companies pursuing a global strategy

A. usually have low operating costs and high

efficiency.
B. often have decentralized decision making and quick response to changes in
local competition.
C. have loose headquarters control over product
strategy.
D. have low levels of transportation and tariff
costs.
E. have high levels of local market
customization.

Companies pursuing a global strategy usually have low operating costs and high
efficiency.

75. When a company faces strong pressures for both reducing costs and adapting
products for local markets, it should tend to use a

A. global
strategy.
B. multidomestic
strategy.
C. transnational
strategy.
D. differentiation
strategy.
E. home replication
strategy.

When a company faces strong pressures for both reducing costs and adapting
products for local markets, it should tend to use a transnational strategy.
80. Scenarios are designed to assist managers

A. in controlling the critical elements of the external

forces.
B. in brainstorming various plausible stories about the
future.
C. in preparing
budgets.
D. in establishing vision
statements.
E. in understanding historical
events.

Scenarios are multiple, plausible stories for probable futures. Scenarios integrate a
variety of ideas about the future, including key certainties and uncertainties, and
present these ideas in a useful and comprehensible manner. Managers can
brainstorm various "what-if" scenarios, raising and challenging their assumptions
and projected outcomes before committing to a specific course of action.