Question 1

A multinational enterprise is defined as a company that

Accepted Answer

A)  controls production assets in more than one country.
B)  has board members from a variety of countries.
C)  exists primarily to avoid taxes.
D)  has stock that is publicly traded in many countries.E) None of the above
F) A) and B)

Question 2

Compared to free trade, a ban on imports of a good

Accepted Answer

A)  increases the domestic price of the good.
B)  decreases consumer surplus.
C)  results in a deadweight loss.
D)  All of the above.E) A) and B)
F) None of the above

Question 3

Your U.S.-based company is selling parts to a company in Bangladesh. If you require payment in US$

Accepted Answer

A)  the Bangladeshi company bears the exchange rate risk.
B)  your company bears the exchange rate risk.
C)  the companies share in the exchange rate risk.
D)  there is no exchange rate risk.E) A) and D)
F) A) and B)

Question 4

-The above figure shows the market for rice in Japan. S2 represents the domestic supply curve, and S1 represents the world supply curve. If imported rice is banned, the loss in social welfare is

Accepted Answer

A)  a + b + c + d + e.
B)  a.
C)  c + e.
D)  i.E) A) and B)
F) C) and D)

Question 5

International price discrimination for a good is possible if

Accepted Answer

A)  goods are sold through the gray market.
B)  the price difference between two countries is greater than the transaction costs in arbitrage.
C)  the price difference between two countries is less than the transaction costs in arbitrage.
D)  None of the above.E) A) and D)
F) B) and D)

Question 6

Which of the following is likely to decrease the exchange rate of Yen to euros (¥/€) ?

Accepted Answer

A)  a decrease in investment opportunities in the U.S.
B)  an increase in investment opportunities in the Japan
C)  a decrease in demand for European goods in Japan
D)  an increase in investment opportunities in the eurozoneE) A) and C)
F) B) and C)

Question 7

If a currency such as the US$ is traded in a competitive market, a(n) ________ in demand for the US$ ________ the price of the US$ in terms of another currency such as the Japanese Yen (¥) .

Accepted Answer

A)  increase; lowers
B)  increase; raises
C)  decrease; raises
D)  change; lowersE) A) and B)
F) B) and D) B

Question 8

A trade policy that protects domestic producers from certain actions taken by foreign governments or firms is

Accepted Answer

A)  illegal under WTO rules.
B)  called a contingent protection policy.
C)  considered a beggar-thy-neighbor policy.
D)  intended to protect domestic consumers.E) C) and D)
F) All of the above

Question 9

A pollution haven is

Accepted Answer

A)  a place where people actually like pollution and view it as a positive externality.
B)  a location with weak environmental rules that attracts manufacturing companies due to decreased costs.
C)  a place that has very low worker wages.
D)  unattractive for multinational investment because of the ambient pollution.E) C) and D)
F) A) and D)

Question 10

Your U.S.-based company is doing business internationally. One way to mitigate exchange rate risk is to

Accepted Answer

A)  require payment in US$.
B)  use a forward contract.
C)  use a futures contract.
D)  All of the above.E) None of the above
F) B) and D)

Question 11

-The above figure shows the market for rice in Japan. S2 represents the domestic supply curve, and S1 represents the world supply curve. Suppose a free market exists. The smallest tariff necessary to completely eliminate imported rice is

Accepted Answer

A)  $1 per unit.
B)  $2 per unit.
C)  $3 per unit.
D)  $4 per unit.E) B) and C)
F) A) and D) B

Question 12

An exchange rate is

Accepted Answer

A)  the price of one currency in terms of another.
B)  the monetary value of goods and services exchanged for imports.
C)  the amount of gold a currency will buy.
D)  All of the above.E) A) and D)
F) All of the above

Question 13

Creating market power through the use of tariffs or quotas can

Accepted Answer

A)  drive price to the monopoly level.
B)  increase the world price of the good that is targeted.
C)  increase government revenue.
D)  All of the above.E) C) and D)
F) A) and D)

Question 14

One of the major effects of trade liberalization has been

Accepted Answer

A)  the liberal use of tariffs and quotas.
B)  an increase in the use of beggar-thy-neighbor trade policies.
C)  the globalization of supply chains.
D)  an increase in the world price for most goods.E) None of the above
F) A) and B)

Question 15

If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are no transaction costs, and the exchange rate is 10 rand/US$, then

Accepted Answer

A)  there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in South Africa will drop.
B)  there is an arbitrage opportunity by buying the wine in the U.S., and selling it in South Africa and the price in the U.S. will drop.
C)  there is no arbitrage opportunity.
D)  Unable to determine, since France is in the eurozone and we would need exchange rates in euro terms.E) A) and D)
F) A) and C)

Question 16

According to the mini-case on the Barbie Doll, Mattel is successful because

Accepted Answer

A)  it has been selling Barbie dolls for a long time.
B)  the Barbie doll is the top import into the U.S.
C)  international trade allows them to produce a wide variety of doll types at many price points.
D)  there are low fixed costs for product design.E) All of the above
F) A) and B) C

Question 17

Outsourcing generally results from

Accepted Answer

A)  unpatriotic behavior.
B)  comparative advantage.
C)  tax evasion.
D)  rent seeking.E) C) and D)
F) All of the above

Question 18

If an Albanian company hires a U.S.-based law firm, it is

Accepted Answer

A)  insourcing, from a U.S.-perspective.
B)  using domestic outsourcing.
C)  changing into a multinational enterprise.
D)  vertically integrating.E) A) and B)
F) A) and C)

Question 19

If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then the U.S.

Accepted Answer

A)  a comparative advantage in the production of beer.
B)  an absolute advantage in the production of beer.
C)  a comparative advantage in the production of pizza.
D)  a comparative advantage in the production of beer and pizza.E) B) and D)
F) None of the above

Question 20

Your U.S.-based company is selling parts to a company in Chile and the company will pay you US$10,000 in 3 months. The current exchange rate is 490 pesos/US$. If the exchange rate at the time of payment is 510 pesos/US$

Accepted Answer

A)  you earn additional profit.
B)  the Chilean company will end up paying more for the goods.
C)  the Chilean company will end up paying less for the goods.
D)  you earn less profit.E) C) and D)
F) All of the above

Exam 17: Global Business

A multinational enterprise is defined as a company that

Correct AnswerverifiedShow Answer

Compared to free trade, a ban on imports of a good

Correct AnswerverifiedShow Answer

Your U.S.-based company is selling parts to a company in Bangladesh. If you require payment in US$

Correct AnswerverifiedShow Answer

-The above figure shows the market for rice in Japan. S2 represents the domestic supply curve, and S1 represents the world supply curve. If imported rice is banned, the loss in social welfare is

Correct AnswerverifiedShow Answer

International price discrimination for a good is possible if

Correct AnswerverifiedShow Answer

Which of the following is likely to decrease the exchange rate of Yen to euros (¥/€) ?

Correct AnswerverifiedShow Answer

If a currency such as the US$ is traded in a competitive market, a(n) ________ in demand for the US$ ________ the price of the US$ in terms of another currency such as the Japanese Yen (¥) .

Correct AnswerverifiedB

A trade policy that protects domestic producers from certain actions taken by foreign governments or firms is

Correct AnswerverifiedShow Answer

A pollution haven is

Correct AnswerverifiedShow Answer

Your U.S.-based company is doing business internationally. One way to mitigate exchange rate risk is to

Correct AnswerverifiedShow Answer

-The above figure shows the market for rice in Japan. S2 represents the domestic supply curve, and S1 represents the world supply curve. Suppose a free market exists. The smallest tariff necessary to completely eliminate imported rice is

Correct AnswerverifiedB

An exchange rate is

Correct AnswerverifiedShow Answer

Creating market power through the use of tariffs or quotas can

Correct AnswerverifiedShow Answer

One of the major effects of trade liberalization has been

Correct AnswerverifiedShow Answer

If a bottle of fine French wine costs US$250 in the U.S., 2500 rand in South Africa, there are no transaction costs, and the exchange rate is 10 rand/US$, then

Correct AnswerverifiedShow Answer

According to the mini-case on the Barbie Doll, Mattel is successful because

Correct AnswerverifiedC

Outsourcing generally results from

Correct AnswerverifiedShow Answer

If an Albanian company hires a U.S.-based law firm, it is

Correct AnswerverifiedShow Answer

If the U.S. can produce pizza for $5 each and barrels of beer for $25 each, and Germany can produce pizza for $7 each and barrels of beer for $21 each, then the U.S.

Correct AnswerverifiedShow Answer

Your U.S.-based company is selling parts to a company in Chile and the company will pay you US$10,000 in 3 months. The current exchange rate is 490 pesos/US$. If the exchange rate at the time of payment is 510 pesos/US$

Correct AnswerverifiedShow Answer

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If a currency such as the US$ is traded in a competitive market, a(n) in demand for the US$ the price of the US$ in terms of another currency such as the Japanese Yen (¥) .

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B

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B

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C

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