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The theory of absolute advantage suggests which of the following? |
A country should export those goods and services for which it is more productive than other countries are, and import those goods and services for which other countries are more productive than it is. |
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The theory of comparative advantage suggests which of the following? |
A country should produce and export those goods and services for which it is relatively more productive than other countries are, and import those goods and services for which other countries are relatively more productive than it is. |
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The value of a good equals the value of what is given up to have that good. The previous statement describes which of the following? |
Opportunity cost |
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Use the following table to answer the question below: US EU _____ has the comparative advantage in producing tractors. |
The US |
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What was the economic philosophy that maintained that a country’s wealth was measured by its holdings of gold and silver? |
Theory of Mercantilism |
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Which of the following is an example of an economy of scale? |
The cost of computers decreases as the quantity that is produced increases |
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Which of the following is particularly useful in explaining trade in differentiated goods such as automobiles, expensive electronics equipment, and personal care products, for which brand names and product reputations play an important role in consumer decision making? |
Country similarity theory |
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Which of the following terms describes when a firm’s average cost decreases as the number of different products it sells increases? |
Economies of scope |
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Which theory traces the roles of innovation, market expansion, comparative advantage, and strategic responses of global rivals in international production, trade, and investment decisions? |
Product life cycle theory |
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Which theory states that success in international trade comes from the interaction of four country- and firm- specific elements? |
Theory of national competitive advantage. |
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Which of the following is NOT a reason for the development of modern firm-based trade theories? |
The recognition that countries, not firms, are the agents for international trade |
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Which of the following is FALSE regarding the product life cycle theory? |
The personal computer industry has entered the maturing product stage |
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Which of the following would be an example of the experience curve? |
A advantage that a company gets with factory workers who have experience with a certain product. |
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Which of the following factors is considered by Porter to be an "advanced factor"? |
Education level of workforce |
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Which of the following would occur in stage 3 in the international product life cycle in an innovating firm’s country? |
Production facilities are moved to low labor cost markets |
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Most FDI is either made by or goes to the world’s richest nations |
True |
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Which of the following is NOT a demand factor that affects the FDI decision? |
Logistics |
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All of the following EXCEPT ____ can be used to explain international investment between the US and the UK |
differing rates of return |
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Why do US firms use places like the Bahamas as offshore financial centers? |
It is less heavily taxed, providing a greater profit. |
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Which of the following best accounts for the reason why Swiss pharmaceutical companies are choosing to invest in smaller US biogenetic companies? |
To gain access to research in this area |
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If two countries each devalue their currency by 20 percent, which of the following would happen? |
Neither would gain an advantage because each currency’s value relative to the other would remain the same. |
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Assume we are operating under the gold standard. If the fixed exchange rate between the US dollar and the British pound is .50, and the dollars par value is 5, what is the pounds par value? |
2.5 |
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Why did the sterling-based gold standard originally unravel? |
The outbreak of war ceased normal commercial transactions |
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How did the Marshall Plan assist the World Bank? |
It established the IBRD |
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Which of the following organizations objectives include promoting international monetary cooperation, facilitating the expansion and balanced growth of international trade, promoting exchange stability, and shortening the duration and lessen the degree of disequilibrium in the international balance of payment members? |
International Monetary Fund (IMF) |
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The World Bank System is controlled by ____ |
a weighted voting system |
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Which of the following is NOT one of the objectives included in the IMFs Articles of Agreement? |
To lengthen the duration and increase the degree of disequilibrium in the international balance of payments to its members. |
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Suppose we are operating under the Bretton Woods System. If a currency’s value rises above the range required by the system, that country’s central bank will ___ in the international foreign exchange market. |
Buy gold/foreign currency |
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Why did the US sell one third of its gold reserves in 1971? |
To maintain the dollar’s value |
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Which of the following signified the growing fear that the US could not live up to its Bretton Woods obligations? |
Triffin paradox |
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Which of the following was created in 1979 by the EU in order to manage their currency relationships? |
European Monetary System |
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Which of the following records international business transactions and supplies vital information about the health of a national economy? |
Balance of payments |
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Which of the following countries was forced to unpeg its currency after investors began to distrust the abilities of its borrowers to repay foreign loans? |
Thailand |
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The current account records all of the following types of transactions EXCEPT____ |
short term foreign portfolio investments |
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Which of the following is NOT an asset that is included in the official reserves account? |
Non-convertible currencies |
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Which of the following accounts is used to make the Balance of Trade (BOP) account balance? |
errors and omissions |
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International businesspeople need to pay close attention to Countries’ Balance of Payments statistics for al of the following reasons EXCEPT BOP statistics____ |
usually do not impact businesses that sell inventory |
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Which of the following is the best example of a capital outflow from the US? |
the Tommy Hilfiger Company buys a controlling stake in the UK fashion label Temperley London |
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All of the following are examples of capital inflows into the US EXCEPT |
Sears, Roebuck, and Co. buys 15% of British retailer Selfridges |
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The balance on services reflects which of the following? |
The service sector’s global competitiveness |
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Assume we are comparing the pound and the $. Suppose the annualized forward discount on the pound is 40%. the forward price of the pound is $1.00, and the spot rate of the pound is $1.25. Then we know this AFD was calculated based on the |
6 month forward price |
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What makes up the foreign exchange market? |
buyers and sellers of currency |
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Which of the following can be concluded from this figure? |
There is a higher quantity demanded when the price is lower |
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The direct exchange rate is $.20/ 1 yen. Then the indirect exchange rate is |
50 yen/ $1 |
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Which of the following has been a result of the higher loonie value? |
More Canadian consumers are shopping in the US |
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You work at a bank that performs services for a British bank in the US. What is this called? |
correspondent relationship |
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Which of the following is known as the primary transaction currency for the foreign exchange market? |
US dollar |
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Shondra works for an entity of a US bank that is legally distinct from the bank’s domestic operation and offers international banking services only. They do not need to observe the numerous US domestic banking regulations. What is this type of entity? |
international banking facility |
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Which of the following is a characteristic of the international Fisher effect? |
the national differences in expected inflation rates yield differences in the nominal interest rates among countries. |
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which market is used to make foreign-exchange transactions that are to occur sometime in the future? |
forward market |
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which of the following involves the buying and selling of three different currencies to make a riskless profit? |
three-point arbitrage |
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suppose: 1 pound buys $3 in NY, Tokyo, and London then |
An opportunity for three-point arbitrage exists, but not for two-point arbitrage |
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Daniel is involved in a transaction that involves buying and selling US dollars simultaneously, but delivery is made at two different points in time. What is this called? |
swap transaction |
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Which of the following allows, but does not require, a firm to buy or sell a specified amount of a foreign currency at a specified price at any time up to a specified date? |
currency option |
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Suppose your company has significant assets in pounds. you notice that the pound is selling at a forward premium. you advise your CFO to increase your firms holdings of assets in pounds. is this sound advice? |
yes. a premium means that assets will increase in value |
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In the US, a Big Mac costs on average $5. In Mexico, the Big Mac costs $1.00. The indirect exchange rate between the $ and the peso is 50 pesos. Then we know that the peso is ___ by approximately ___ percent compared with the dollar. |
undervalued; 80 |
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which of the following is the name for Us dollars deposited in any bank account outside the US |
Eurodollar |
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which of the following cities is NOT considered to be a major financial center? |
Bangalore |
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currencies that are freely tradeable are called ____ |
convertible currencies |
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which maker represents a major source of debt financing for the world’s governments, international organizations, and larger firms? |
international bond market |
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Firms sometimes believe that foreign competitors gain an unfair advantage due to which of the following? |
government policies |
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which of the following terms describes a policy for national governments that exert minimal influence over trade? |
free trade |
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a major international corporation has steadily bought up all of a certain resource so they control it. Because they have done this, they are the only corporation manufacturing and marketing the finished product. Which of the following is occurring? |
monopoly profit |
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what is the term used to describe when a national government identifies key domestic industries critical to the country’s economic future and then formulates programs that promote their competitiveness? |
industrial policy |
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use the following payoff matrix to answer this question. numbers are in billions airbus doesnt enter airbus 0 airbus 0 which company/companies has/have a dominant strategy? |
neither |
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boeing enter mkt boeing doesnt enter airbus doesnt enter airbus 0 airbus 0 if the EU wants to ensure that Airbus will enter the market, what is the best policy for it to adopt? |
a subsidy for airbus of $6 billion |
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you would like to market rare earth technologies, yet you are not able to obtain them for a reasonable price. why is this? |
china has created a situation where it controls the export of this product |
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which of the following terms describes a policy for national governments that actively intervene to ensure that domestic firms’ exports receive an equitable share of foreign markets? |
fair trade |
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Canada has imposed a specific tariff on imports of motorcycle parts from the US. Why did it do this? |
to create a larger demand for Canadian motorcycle parts |
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The Us and Canada are friendly trade nations that do not want to damage their relations. They both import and export each others products in large volume and recognize that the potential for problems exists. What could they put in place to help with this? |
voluntary export restraint |
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suppose you import products into the US that weigh very little but that are extremely valuable (high tech microchips). if you must pay a tariff , you would prefer the tariff to be |
specific |
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suppose the US government eliminates all tariffs on foreign cars. As a result, the demand for American-made cars will |
decrease |
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China requires that imported sugar and petroleum be distributed only by state-owned trading enterprises, while Indonesia granted exclusive rights to import rice to a state agency. This is an example of what type of non-quantitive NTB? |
restricted access to distribution networks |
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Singapore uses a tiered tax system based on engine displacement, which hurts the sales of large motorcycles. Taiwan’s transportation ministry has been slow to issue regulations that would allow motorcycles with engines larger than 500cc to travel on its highways throughout the day, which Thailand has an outright ban of motorcycles on its highways. This is an example of what type of non-quantitative NTB? |
regulatory controls |
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Egypt gives state-owned enterprises a 15% bidding preference on public contracts, while Argentina grants domestically owned firms a 5 to 7% preference; Turkey, a 15% pref; Thailand 7%; Paraguay 20%. Russia grants local forms 15% pref on pharmaceutical contracts, while Kenya’s Public Procurement and disposal Act requires that certain government contracts be given only to Kenyan citizens. These are examples of what type of non-quantitative NTBs? |
public sector procurement policies |
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The Philippines restricts foreign ownership in advertising to 30% and in telecommunications to 40%, while foreigners own no more than 49% of local accounting firms in Thailand and 50% of Korean power generators. These are examples of what type of non-quantitiatve NTBs? |
investment controls |
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The National Bank of Ethiopia often makes it difficult for importers to obtain scarce foreign exchange, although state-owned enterprises or firms controlled by the ruling party normally have no such problems. These are examples of what type of non-quantitiatve NTBs? |
currency controls |
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Which of the following statements is FALSE regarding subsidies? |
subsidies can never be so large as to affect the normal pattern of international trade |
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which of the following countries uses the ITA to investigate complains of unfair trade practices? |
United States |
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one country is selling computers for $650 Us dollars locally, but $300 in foreign markets. What is this an example of? |
dumping |
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