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Title: Test 1
1. The increased internationalization of business requires __________ to have a basic knowledge of international business. 
A. all managers    
B. managers of multinationals  
C. managers of transnationals  
D. managers of purely domestic operations  
2. Firms that have substantial operations in more than one country are called 
A. global companies.  
B. multidomestic firms.  
C. affiliated companies.  
D. A, B, and C.  
 E. A and B.
3. An international business 
 A. is a business whose activities involve crossing national borders.    
B. denotes the domestic operations within a foreign country.  
C. is an organization with multicountry affiliates.  
D. is an organization that attempts to standardize operations worldwide.  
4. Foreign business denotes 
A. a business whose activities involve crossing national borders.  
 B. the domestic operations within a foreign country.    
C. an organization with multicountry affiliates.  
D. an organization that attempts to standardize operations worldwide.  
5. International business really began: 
A. with the East India Company chartered in 1600.  
B. when Singer Sewing Machine put up a factory in Scotland in 1868.  
 C. before the time of Christ.    
D. when Colt Fire Arms set up a plant in England.  
6. The trend toward unification and socialization of the global community is illustrated by which of the following: 
 A. Preferential trading arrangements that group several nations into a single market.    
B. Progressive increases in barriers to foreign investment by most governments.  
C. Increased public ownership of much of the industry in formerly communist nations.  
D. All of the above are aspects of the trend toward unification and socialization of the global community.  
7. Due to the expanding importance of foreign-owned firms in local economies, host governments have made their policies toward these companies _______________. 
A. more strict  
 B. more liberal    
C. harsher  
D. more confronting  
E. A and C  
8. In the United States, an overseas investment by an American resident is considered to be a foreign direct investment if it is __________ or more of the stockholder's equity. 
A. 10    
 B. 51  
C. 25  
D. 100  
9. According to the text, one variable commonly used to measure where and how fast internationalization takes place is: 
A. the increase in a nation's population.  
B. the increase in the number of new companies formed.  
 C. the increase in foreign direct investment.    
D. the increase in international trade.  
10. According to opponents of the globalization of trade and investment, 
A. globalization has produced uneven results across nations and people.  
B. globalization has had harmful effects on labor and labor standards.  
C. globalization has contributed to a decline in environmental and health conditions.  
 D. all of the above.    
11. Examples of the kinds of uncontrollable forces listed in the text are: 
A. competitive.  
B. technological.  
C. gravitational.  
 D. A and B.    
E. All of the above.  
12. Unconscious reference to one's own cultural values when judging behavioral actions of others in a new and different environment is called: 
 A. self-reference culture.  
B. self-reference values.  
C. self-reference criterion.    
D. self-reference customs.  
E. self-reference environment.  
13. The international business manager can choose to: 
A. transfer a management practice intact.  
B. transfer and adjust a management practice.  
C. not transfer a management practice at all.  
 D. A and B.  
E. A, B and C.    
14. The quadrupling of world exports between 1990 and 2007 demonstrates that _______________. 
A. businesspeople must be prepared to meet increased competition  
B. domestic business cannot compete with cheap imports  
C. the opportunity to increase sales by exporting is a viable growth strategy  
 D. A, B, and C  
E. A and C    
15. Many of the same Asian countries that are major exporters to the United States are also significant importers of American goods because: 
A. their rising standards of living enable their people to afford more imported products.  
B. they are purchasing large amounts of capital goods to further their industrial expansion.  
C. they are importing raw materials and components that will be assembled and subsequently be exported, often to the U.S.  
 D. All of the above.    
E. A and B  
16. When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include: 
A. The cultures of the two countries should be relatively similar and compatible.  
B. The climate for foreign direct investment in the importing nation is relatively favorable.  
C. Export and import regulations are not insurmountable.    
 D. All of the above  
E. A and B  
17. Foreign investment includes the following components: 
A. portfolio investment.  
B. joint venture investments.  
C. direct investment.  
 D. A and C.    
E. A, B, and C.  
18. In using GNP per capita as a basis for making comparisons of nations' economies, 
A. extreme care must be exercised to avoid drawing unwarranted conclusions.  
B. realize statistical systems in many developing countries are deficient.  
C. realize the reliability of the data provided is often questionable.  
 D. All of the above.    
E. B and C.  
19. GDP/capita: 
A. is an excellent tool for comparing the market potential of different nations.  
B. takes into consideration the distribution of income.  
C. is an arithmetic mean obtained by dividing GDP by the population.    
 D. all of the above.  
E. A and B.  
20. These are reasons to enter foreign markets: 
A. to increase profits, protect foreign markets, guarantee market share  
B. to protect foreign markets, maintain access to raw materials, and establish geographic diversification  
 C. to increase profits  
D. B and C    
21. When foreign exchange is scarce, governments usually give preference to the importation of: 
 A. B and C.    
B. capital goods.  
C. raw materials.  
D. consumer goods.  
E. all of the above.  
22. Methods for supplying foreign markets may be categorized in just two activities: 
 A. exporting to a foreign market and manufacturing in it.    
B. exporting goods to a foreign market and exporting services to it.  
C. manufacturing in a foreign market and licensing technology.  
D. establishing joint ventures and wholly-owned production facilities.  
23. Mercantilists believed that: 
A. merchants should import goods to raise the level of living.  
B. governments should lower import duties.  
 C. a nation should have an export surplus in order to accumulate gold.    
D. a nation should produce goods for which there is a comparative advantage.  
24. Adam Smith claimed: 
A. that governments, not market forces, should determine the directions, volume, and composition of international trade.  
B. a nation could trade advantageously if it had a comparative advantage.  
 C. that market forces, not government controls, should determine direction, volume, and the composition of international trade.    
D. that customers' tastes are affected by income levels.  
25. If Ecuador has an absolute advantage in coffee and Argentina in wheat, then, according to trade theory: 
A. Ecuador should focus production on coffee and trade for other goods.  
B. Ecuador would do well to produce its own coffee rather than import it from Bolivia.  
C. Argentina should produce as much wheat as possible and trade for coffee.  
 D. All of the above.    
26. According to the theory of comparative advantage, 
 A. a nation should produce the goods at which it is most efficient.    
B. a nation can gain from trade if it is equally inefficient in producing two goods.  
C. a nation must have an absolute advantage in at least one good to gain from trade.  
D. All of the above.  
27. The theory of factor endowment: 
A. explains why France sends us cosmetics, wine, and clothing.  
 B. states that a nation will trade goods that can be produced with the production factor that is most abundant.    
C. explains why an automobile can be made either by hand or by a capital-intensive process.  
D. explains why transportation costs may be ignored when calculating the costs of imports.  
28. Off-shoring is an application of: 
 A. the factor endowment theory.    
B. differences in taste.  
C. money market rates.  
D. exchange rate theory.  
29. The International Product Life Cycle is a theory that explains 
 A. the direction of foreign trade.  
B. the direction of foreign direct investment.  
C. why Japan and Great Britain have invested so much in the U.S.  
D. A, B, and C.  
E. A and B.    
30. Economies of scale and the experience curve effect are important for international trade because: 
 A. most manufacturing, mining, and transportation industries are subject to economies of scale.    
B. they explain how a nation's industries can become low-cost producers if the nation has an abundance of a certain class of production factors.  
C. they justify efforts at being a first-mover in order to become an international leader.  
D. all of the above  
31. To sum up international trade theory, we can say that the primary reason for trade is: 
A. the increase in OPEC oil prices.  
B. governments want to accumulate money.  
 C. the existence of price differentials among nations.    
D. the creation of new nations from former colonies.  
32. Which of the following is explained by international trade theory? 
A. differences in production costs.  
B. differences in levels of technology.  
C. foreign exchange rates.  
D. differences in efficiency of factor use.  
 E. all of the above.    
33. The monopolistic advantage theory suggests that firms in oligopolistic industries are likely to _______________ foreign direct investment when they have technical and other advantages over indigenous firms. 
 A. increase    
B. reduce  
C. ignore  
D. not change  
34. Dunning's Eclectic Theory of International Production states that if a firm is going to invest in production facilities abroad, it must have the following kinds of advantages: 
A. ownership-specific, location-specific, and internationalization.  
B. strategic, organizational, and technological.  
 C. ownership-specific, location-specific, and internalization.    
D. technological, financial, and human resource.  
E. none of the above  
35. International institutions that work to aid developing countries are: 
A. difficult to locate.  
B. usually religious organizations.  
C. listed on the New York stock exchange.  
 D. multilateral and often worldwide.    
36. Which is not true? The World Trade Organization is: 
 A. Funded by pro-trade unions.    
B. A successor to GATT.  
C. A multinational organization.  
D. Committed to reducing trade barriers.  
37. Trade benefits to poorer nations have been slower in developing than for richer nations because: 
 A. Poorer nations have more social inequalities to begin with.  
B. Globalization exploits developing nations.  
C. Agricultural subsidies hit poorer nations very hard.    
D. International organizations have given up on aid to developing countries.  
38. The WTO 
 A. has had limited success.  
B. has helped to increase the volume of trade globally.    
C. creates regulations that require additional administration.  
D. supports regional development banks.  
39. OPEC formed as a result of: 
  Student Response Value Correct Answer Feedback
 A. a desire to control the pricing on members' resources.    
B. political agitation against capitalism.  
C. the need to fix prices.  
D. the request of OECD.  
40. The major forms of economic integration include: 
A. customs union.  
B. free trade area.  
 C. common market.  
D. all of the above.    
41. A significant change in the European Union power is the power to: 
 A. mint currency.    
B. exercise firm surveillance over members' immigration practices.  
C. establish private banks.  
D. buy agricultural land.  
42. The EU's purpose is to: 
A. further reduce customs and tariffs in worldwide trade negotiations.  
B. to increase the number of member nations.  
 C. to develop an integrated Europe.    
D. none of the above.  
43. The European Monetary Union: 
A. all of the following.    
B. has taken monetary control away from the sovereign state.  
 C. eliminated the need for individual member-nation currencies.  
D. has been successful for all who joined the EMU.  
44. The purpose of NAFA is: 
A. to establish a forum for international monetary cooperation.  
B. to legitimate illegal aliens.  
 C. to increase trade among member countries.    
D. all of the above.  
45. Which of the following is not included in the membership criteria for the European Union? 
A. must have a market economy.  
B. must show evidence of respect for democracy.  
 C. must show evidence of respect for the protection of minorities.  
D. must have a rising GDP.    
46. The Uruguay Round refers to the: 
A. 2000 world soccer competition.  
B. International Monetary Fund negotiations with Uruguay.  
 C. GATT negotiations that began in Uruguay and created the WTO.    
D. World Bank negotiations with Uruguay.  
47. ASEAN: 
A. caused the 1997 SE Asia financial crisis through restrictive monetary policy.  
 B. is one of the most dynamic economic regions in the world once again.    
C. decided Japan should withdraw membership.  
D. has developed restrictive trading policies.  
48. NAFTA represents 
A. a free trade area in Central America.  
B. the UN's establishment of a free trade area.  
 C. an agreement among the U.S. and two of its major trading partners.    
D. underdeveloped nations at the UN.  
49. Which of the following countries decided to not join the European Monetary Union? 
 A. Great Britain    
B. Germany  
C. Greece  
D. France  
50. Mercosur, led by Brazil, has: 
 A. achieved a common market.  
B. become a customs union.  
C. created an institution similar to the European commission of the EU.  
D. grown rapidly since its inception.    

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