International Business:

Context & Strategies

Midterm Review – 7/9

Review QuestionsGlobalization has been blamed for:

a) Unemployment in developed nations

b) The preservation of national culture

c) Environmental protection regulations

d) Economic political isolation

Review QuestionsDeveloping nations:

a) Are too insignificant to be home to large multinationals

b) Will have slowing growth due to several trends in globalization

c) Do not offer significant competition in world markets

d) Can be expected to shift the axis away of the world economy from North American and Western Europe.

Review QuestionsApproximately how many people use the Internet

today?

a) 150,000,000

b) 600,000,000

c) 1,200,000,000

d) 1,400,000,000

Review QuestionsA nation’s political system can be assessed:a) By measuring the degree to which collectivism is emphasized over

individualism and the degree to which the country is democratic versus totalitarian

b) By measuring the degree to which totalitarianism is emphasized over collectivism and the degree to which the country is democratic versus totalitarian

c) By identifying whether it is a democracy or a dictatorship

d) By measuring the degree to which democracy is emphasized over collectivism and the degree to which the country is democratic versus totalitarian

Review QuestionsWhen a resource is held in common by all, but not

own be one, is overused by individuals, resulting in its degradation is a phenomenon known as:

a) Hardin’s obloquy

b) Environmental tragedy

c) The tragedy of the commons

d) Environmental degradation

Review QuestionsThe Foreign Corrupt Practices Act:

a) Outlaws the paying of bribes to foreign government officials

b) Amended the law of the Tragedy of the Commons

c) Has served as model for legislation in most developing countries

d) Obliged UN member states to make the bribery of a foreign public official a criminal offense

Review QuestionsEconomics of scale:

a) Are unit cost reductions associated with a large scale of output

b) Are essential parts of both comparative advantage and product life-cycle theories

c) Are useful to only a few large service companies

d) Makes no distinction between fixed and variable costs in globalization of production

Review QuestionsThe __________ suggests that trade is mutually

beneficial because it allows for the specialization of production, the realization of scale economies, the production of a greater variety of products, and lower prices.

a) Product life cycle theory

b) New trade theory

c) Theory of competitive advantage

d) Theory of comparative advantage

Review QuestionsIf France threatens punitive trade sanctions to

force Canada to “play by the rules”, France is employing a _________ policy.

a) Retaliation

b) National security

c) Consumer protection

d) Human rights protection

Review QuestionsAccording to Krugman, trade policy designed to

retaliate against another country’s trade policy:

a) Would benefit consumers

b) Would benefit taxpayers

c) Would hurt the initiating nation

d) Would hurt the citizens of both countries

Review QuestionsCritics have suggested that the decision by the EU

to adopt the euro was wrong because:

a) The EU is not an optimal currency area

b) Of the similarities in the underlying structure of economic activity that make it unnecessary

c) It should have occurred at the common market stage

d) It shifts responsibility for national monetary policies to the individual countries

Review QuestionsSeveral levels of economic integration are

possible. Three such levels from the lease integrated to the most integrated are:

a) Free trade area, customs union, common market

b) Customs union, political union, economic union

c) Free trade area, political union, common market

d) Common market, customs union, political union

Review QuestionsThe introduction of the euro has resulted in all of

the following except:

a) European investors should be able to better diversify their risk

b) Consumers should gain through lower prices

c) European companies should become more efficient

d) Individual countries will be able to set their own interest rates

Review QuestionsIf a tourist buys local currency, the exchange rate

used will be the:

a) Tourist rate

b) Spot rate

c) Real rate

d) Forward rate

Review QuestionsThe formula i= r + I is known as:

a) PPP

b) The Efficient Market Theory

c) The Inefficient Market Theory

d) The Fisher Effect

Review QuestionsCapital flight:

a) Is most likely to occur when the value of domestic currency is appreciating rapidly

b) Occurs when residents and nonresidents rush to convert their holdings of domestic currency into foreign currency

c) Affects tourists but has only a marginal impact on business transactions

d) Is actively encouraged by governments in well-defined circumstances

Review QuestionsThe IMF has received criticism:

a) Revolving around its lack of accountability

b) Focusing on its failure to respond to the high value of the dollar

c) For its inability to work hand-in-hand with the World Bank

d) Charging that the IMF has emphasized developing nations at the expense of developed countries

Review QuestionsThe major risk of a Eurocurrency deposit is:

a) Exchange rate risk

b) Risk of bank failure

c) Low liquidity

d) Domestic regulatory risk

Review QuestionsAs compared to how they were between 1945 and

1973, exchange rates today are:

a) Slightly more volatile

b) Much more volatile

c) Less volatile

d) In equilibrium

Review QuestionsWhich of the following is not a cause for banking,

foreign debt, and/or currency crises?

a) Low relative price inflation

b) A widening current account deficit

c) Excessive expansion of domestic borrowing

d) Asset price inflation

Essay Question Tips Porter’s Diamond Vernon’s Product Life Cycle Theory The WTO The European Union Methods of FDI (Greenfield, M&A, etc.) A young manager has finished Harvard Summer School and has starting working

for the family business, a growing construction equipment company in Brazil. She is responsible for a sales team with significant experience (the average salesperson has 10 years of experience). Shortly after she begins to work, she realizes that the salesmen (including her uncle) have been soliciting government contracts using tactics that she believes are unethical. What advice would you giver her knowing 1) she has a personal interest in seeing the company succeed (i.e. continue to grow) and 2) she is functioning in a country with a high power distance and high masculinity. Hint: “Think Outside of the Box.”

Exam Tips Arrive early Remember to make a study sheet (double-sided

8.5”x11”) Eat a snack before you come (Sounds like I’m

your mom but it actually helps!) If you miss the exam, you will receive a zero; no

excuses RELAX!