|
A firm experiences economies of scale when
A. the average cost of producing a good decreases as the firm’s output of the good decreases.
B. the average cost of producing a good increases as the firm’s output of the good increases.
C. the average cost of producing a good increases as the firm’s output of the good decreases.
D. the average cost of producing a good decreases as the firm’s output of the good increases.
|
D
|
|
2. When the market for a product stabilizes and it becomes more of a commodity, the product is most likely in
which stage of the product lifecycle?
A. Standardized Product Stage
B. Expanding Product Stage
C. Maturing Product Stage
D. Stabilized Product Stage
|
A
|
|
3. Which conclusion could NOT be drawn from the Balance of Payments regarding a particular country?
A. The Balance of Payments can indicate currency depreciation caused by a sharp increase in exports
B. The Balance of Payments can indicate whether or not the country will emerge into global markets in the near
future
C. The Balance of Payments can warn of political policies that may have an effect on the business climate
D. None of the above; the Balance of Payments only shows debits and credits
|
A
|
|
4. Which of the following is an example of capital outflow for Germany?
A. GM sells stock in Audi to German resident
B. Volkswagen exports the new 2014 VW Beatle to the United Kingdom
C. German company Haribo sells a production facility in Ireland to an Irish competitor
D. Kinder, another German company, acquires Haribo in a multimillion dollar transaction
|
A
|
|
5. Assume we are operating under the Bretton Woods system. The British pound is pegged at US$3.50. Which
of the following would NOT occur if the British pound depreciates to US $3.395?
A. The British government could sell gold to buy pounds
B. The British government could sell U.S. dollar reserves to buy pounds
C. The British government could implement policies to increase the international demand for pounds
D. The British government could do nothing as long as the pound remains within 5% of the peg
|
D
|
|
6. Which of the following is a true statement about supply and demand?
A. The currency demand curve is upward sloping
B. As the price of a currency increases, demand increases
C. As the price of a currency decreases, the quantity demanded increases
D. As the price of a currency decreases, demand increases
|
C
|
|
7. What is the difference between a currency futures contract and a swap?
A. A currency futures contract is an option not an obligation, while a swap is an obligation
B. A swap is an option not an obligation, while a currency futures contract is an obligation
C. The currency pair is exchanged on a future delivery date in a currency futures contract, while the currency
pair is exchanged immediately or within a very short period with a swap
D. The price is determined on the delivery date in a currency futures contract, while the price is determined at
signing with a swap
|
C
|
|
8. Which of the following is true when the forward price is less than the spot price?
A. The currency is selling at a forward premium
B. The currency is selling at a forward discount
C. The nation with this currency is probably experiencing a trade surplus
D. The nation with this currency is probably experiencing low inflation
|
B
|
|
9. An import tariff has been placed on foreign cars coming into the U.S. This will _______ the demand for U.S.
cars and _______ the demand for foreign cars. With this change of demand, the price of U.S. cars will
________.
A. Increase, decrease, increase
B. Decrease, increase, decrease
C. Increase, decrease, decrease
D. Decrease, increase, increase
|
A
|
|
10. According to Strategic Trade Theory, in global industries with _____ competitors, governments can make
companies profitable by _______ them.
A. many; subsidizing
B. a few; subsidizing
C. many; regulating
D. a few; deregulating
|
B
|
|
Use this table to answer questions 11-15.
U.S. France
Pairs of jeans 8 12
Bottles of wine 16 8
11. The opportunity cost of the U.S. producing 1 pair of jeans is
a. 1/2 bottle of wine
b. 2 bottles of wine
c. 6 bottles of wine
d. 8 bottles of wine
e. 12 bottles of wine
|
B
|
|
Use this table to answer questions 11-15.
U.S. France
Pairs of jeans 8 12
Bottles of wine 16 8
12. The opportunity cost of France producing 1 bottle of wine is
a. 2/3 pair of jeans
b. 1 pair of jeans
c. 1.5 pairs of jeans
d. 8 pairs of jeans
e. 12 pairs of jeans
|
C
|
|
Use this table to answer questions 11-15.
U.S. France
Pairs of jeans 8 12
Bottles of wine 16 8
13. The U.S. has a comparative advantage in the production of
a. jeans only
b. both jeans and wine
c. wine only
d. neither jeans nor wine
|
C
|
|
Use this table to answer questions 11-15.
U.S. France
Pairs of jeans 8 12
Bottles of wine 16 8
14. France has a comparative advantage in the production of
a. jeans only
b. both jeans and wine
c. wine only
d. neither jeans nor wine
|
A
|
|
Use this table to answer questions 11-15.
U.S. France
Pairs of jeans 8 12
Bottles of wine 16 8
15. France has an absolute advantage in the production of
a. jeans only
b. both jeans and wine
c. wine only
d. neither jeans nor wine
|
A
|
|
16. MAX Electronics produces tiny wireless speakers that can be used with computers and MP3 players. The
firm has built new factories to expand capacity and meet increasing domestic and foreign demand. Over the last
six months, foreign and domestic competitors have emerged with a similar product in an attempt to benefit from
high consumer demand. MAX Electronics is most likely in the ________ product stage of the product life cycle.
a. globalized
b. standardized
c. maturing
d. new
|
C
|
|
17. Different countries receive different amounts of international investment only because interest rates differ
country to country.
a. True
b. False
|
B
|
|
18. When a business is able to earn higher profits operating abroad than at home, the firm has ______.
a. Subsidies from its home government
b. a location advantage
c. an ownership advantage
d. met the requirements for WTO membership
|
B
|
|
19. Which theories suggest that intraindustry trade will be common?
a. Country Similarity and New Trade
b. Product Life Cycle and Comparative Advantage
c. Dunning’s Eclectic and Hecksher-Ohlin
d. National Competitive Advantage and Absolute Advantage
|
A
|
|
20. Which theory suggests that a country has a comparative advantage in producing products that intensively
use resources it has in abundance?
a. Mercantilism
b. The Theory of Comparative Advantage
c. The Leontif Paradox
d. Heckscher-Ohlin Theory
|
D
|
|
21. Assume we are operating under the gold standard. If the fixed exchange rate between the dollar and the yen
is 120, and the dollar’s par value is 60, what is the yen’s par value?
a. 7,200
b. 720
c. 2
d. 0.5
|
A
|
|
22. The United States currently has a trade ______. If we were operating under the gold standard, this would
result in a(n) ________.
a. deficit; decrease in the money supply
b. deficit; increase in the money supply
c. surplus; decrease in the money supply
d. surplus; increase in the money supply
|
A
|
|
23. Under the Bretton Woods System, countries pledged to maintain the value of their currencies within
_____of the par value. If a currency’s value fell below that range, that country’s central bank would ____
gold/foreign currency on the international forex market.
a. ±2.25%; buy
b. ±2.25%; sell
c. ±1%; buy
d. ±1%; sell
|
D
|
|
24. Under the current international monetary system,
a. most countries have dollarized
b. governments are barred from intervening to affect exchange rates
c. supply and demand mainly determine currency values
d. the euro is currently pegged to the dollar
|
C
|
|
25. As a result of the 1973 OPEC oil embargo,
a. world oil prices tripled
b. inflation spiked in oil-importing nations
c. petrodollars were lent to developing countries
d. a and b but not c
e. b and c but not a
|
E
|
|
26. The _____ records purchases of assets by the private and public sectors.
a. accounting system
b. capital account
c. capital fund
d. current account
|
B
|
|
27. Canadian aerospace company Bombardier buys a controlling stake in Brazilian aerospace company
Embraer. This is an example of
a. a capital inflow to Brazil
b. a capital outflow from Brazil
c. a capital inflow to Canada
d. none of the above
|
A
|
|
28. If domestic ownership of foreign assets falls, this is considered a
a. capital inflow
b. capital outflow
c. current account debit
d. current account credit
|
A
|
|
29. The IMF uses _____ to determine voting power in the organization.
a. political clout
b. official reserve levels
c. quotas
d. negotiations
|
C
|
|
30. Why did the Bretton Wood System collapse?
a. President Nixon was globally unpopular
b. The IMF had exhausted all its funds trying to support it
c. The U.S. supply of gold could no longer support it
d. The Smithsonian conference failed to save it
|
C
|
|
31. The direct exchange rate is $1.65 / ₤1. Then the indirect exchange rate is
a. ₤0.61 / $1
b. $0.61 / ₤1
c. ₤1 / $1.65
d. ₤1.65 / $1
|
A
|
|
32. Large international banks may profit from all of the following EXCEPT
a. speculation
b. the spread between the spot/ask price for currencies
c. arbitrage
d. interbank transactions conducted for large clients
|
B
|
|
33. According to the International Fisher Effect, if the forward premium on a country’s currency is shrinking,
this must mean that
a. the country’s nominal interest rate is falling because the country’s inflation rate is expected to fall
b. the country’s nominal interest rate is rising because the country’s inflation rate is expected to fall
c. the country’s nominal interest rate is falling because the country’s inflation rate is expected to rise
d. the country’s nominal interest rate is rising because the country’s inflation rate is expected to rise
|
D
|
|
34. Assume we are comparing the ₤ and the $. Suppose the annualized forward premium on the ₤ = 25%. The
forward price of the ₤ = $1.80, and we are calculating the AFD based on the 6-month forward price. What is the
spot price of the ₤? (Answer may or may not be approximate.)
a. 1.60
b. 1.73
c. 1.88
d. 2.03
|
A
|
|
Suppose: ₤1 buys €1.50 in NY, Tokyo, and London
€1 buys $1.50 in NY, Tokyo, and London
₤1 buys $1.50 in NY, Tokyo, and London
38. Which of the following statements is true?
a. The cross rate and direct quote are the same, so there is no opportunity for three-point arbitrage
b. The cross rate and direct quote are the same, so there is an opportunity for three-point arbitrage
c. The cross rate and direct quote differ, so there is an opportunity for three-point arbitrage
d. The cross rate and direct quote differ, so there is no opportunity for three-point arbitrage
|
C
|
|
Suppose: ₤1 buys €1.50 in NY, Tokyo, and London
€1 buys $1.50 in NY, Tokyo, and London
₤1 buys $1.50 in NY, Tokyo, and London
39. Is there an opportunity for two-point arbitrage?
a. Yes, because the direct rates are the same in all markets
b. Yes, because the direct rates differ in all markets
c. No, because the direct rates are the same in all markets
d. No, because the direct rates differ in all markets
|
C
|
|
40. Eurocurrency is
a. another name for the EU’s currency, the euro
b. money held outside its country of issue
c. exactly the same thing as Eurodollars
d. b and c, but not a
|
B
|
|
45. Assume that the majority of microchips in computers made and sold in the U.S. come from China. If the
U.S. imposes a tariff on Chinese microchips, the equilibrium price of American-made computers will
a. stay the same
b. rise
c. fall
d. fall, then rise
|
B
|
|
46. Which of the following would likely NOT support a U.S. tariff on microchips?
a. American computer consumers
b. American microchip manufacturers
c. American computer manufacturers
d. a and c but not b
|
D
|
|
47. Gatorstan has provided subsidies to its football gear manufacturing sector. As a result, the domestic supply
of football gear has _______, causing the price to ______. Gatorstan is using a(n) _________ policy.
a. decreased; increase; strategic trade
b. decreased; decrease; infant industries
c. increased; increase; strategic trade
d. increased; decrease; infant industries
|
D
|
|
48. You imported 10,000 kilos of fruit into the U.S. worth $500,000 and paid a tariff of $11,000. Then you must
have paid a
a. specific tariff of 11 cents/kilo
b. specific tariff of 2.2%
c. compound tariff of 10 cents/kilo + 2% ad valorem
d. compound tariff of 20 cents/kilo + 10% ad valorem
|
C
|
|
49. Africans pay up to _____ extra for goods because of ______.
a. 10%; transportation costs
b. 40%; transportation costs
c. 10%; underdeveloped infrastructure
d. 40%; underdeveloped infrastructure
|
B
|
|
50. The cost of producing a football in Seminolia is $2. Seminolia exports footballs to Gatorstan, where
Seminolia sells them for $1.90. This is an example of
a. dumping
b. price discrimination
c. predatory pricing
d. a and c but not b
e. a and b but not c
|
D
|
