Question 1

The government of Indonesia is concerned that MNCs are adjusting transfer prices to their Indonesian subsidiaries in order to decrease tariff payments in Indonesia.The Indonesian government should
A)review increases in transfer prices.
B)review decreases in transfer prices.
C)require spot pricing on all transfer prices.
D)require forward pricing of all transfer prices.

Accepted Answer

The Indonesian government should review decreases in transfer prices because lowering transfer prices can be a strategy used by MNCs to reduce the taxable base in Indonesia, thereby decreasing the amount of tariffs and taxes paid to the Indonesian government. By reviewing decreases in transfer prices, the government can ensure that these prices are not artificially lowered to evade taxes and tariffs.

Question 2

Tunetoy Industries is concerned about export price escalation for its personal computers in its Thai market.It should consider
A)promoting its products as luxury items.
B)establishing a cartel.
C)joining a cartel.
D)increasing its transfer prices to Thailand.

Accepted Answer

Promoting its products as luxury items can justify the high price and create a perception of exclusivity, which will not be affected by price escalation. This strategy can help maintain the market share and prevent losing customers to competitors who offer lower prices. Options B, C, and D are unethical and illegal practices that can harm the company's reputation and lead to legal consequences.

Question 3

Indopharm has a Bulgarian marketing subsidiary that complains that export price escalation makes the firm's products too expensive to sell in Bulgaria.The subsidiary wants the firm to adjust he transfer price to Bulgaria.What should Indopharm do about the transfer price?
A)Increase it.Tariff costs will decrease.
B)Decrease it.Tariff costs will decrease.
C)Decrease it.Transportation costs will decrease.
D)Do nothing.Transfer prices do not affect either transport or tariff costs.

Accepted Answer

If Indopharm decreases the transfer price, it will make the products more affordable for the Bulgarian market, and the subsidiary will be able to sell more products. This, in turn, will reduce the overall inventory and storage costs, making it easier and cheaper to manage the subsidiary's operations. Additionally, the lower transfer price will also help reduce the tariff costs, making the products more competitive in the local market. Therefore, decreasing the transfer price is the best solution for Indopharm to address the subsidiary's concern.

Question 4

The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease tariff payments in Saudi Arabia.The Saudi government should
A)review increases in transfer prices.
B)review decreases in transfer prices.
C)initiate price controls.
D)require forward pricing of all transfer prices.

Accepted Answer

Decreases in transfer prices can lead to lower tariff payments since tariffs are often calculated based on the declared value of goods. By reviewing decreases in transfer prices, the Saudi government can ensure that MNCs are not underreporting the value of goods to reduce tariff liabilities.

Question 5

The government of Thailand is concerned that MNCs are adjusting transfer prices to their Thai subsidiaries in order to decrease their income tax liability in Thailand.The Thai government should
A)review increases in transfer prices.
B)review decreases in transfer prices.
C)initiate price controls.
D)require forward pricing of all transfer prices.

Accepted Answer

The Thai government should review increases in transfer prices because MNCs may be adjusting transfer prices to their Thai subsidiaries in order to decrease their income tax liability in Thailand.

Question 6

Paris Pharmaceuticals wishes to establish a pricing policy to avoid dumping charges in a West African country.Three global pharmaceutical firms export to the country,but there is no local manufacture of pharmaceuticals.Paris Pharmaceuticals should
A)be sure its prices are not much higher than the prices of the other MNCs.
B)be sure its prices are not much lower than the prices of the other MNCs.
C)ask for price controls.
D)None of the above

Accepted Answer

The answer of Paris Pharmaceuticals wishes to establish a pricing...

Question 7

MabHill Corporation markets widgets to manufacturers worldwide and wishes to establish a pricing policy to avoid dumping charges in a Latin American country.Besides MabHill,3 MNCs export to the country.There is no local manufacture of widgets.What is wrong with this scenario?
A)MabHill should be sure its prices are not much higher than the prices of the other MNCs.
B)MabHill should be sure its prices are not much lower than the prices of the other MNCs.
C)Dumping doesn't apply when there is no local manufacturing.
D)Dumping doesn't apply to B2B marketing.

Accepted Answer

Dumping doesn't apply when there is no local manufacturing.

Question 8

The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease their income tax liability in Saudi Arabia.The Saudi government should
A)require spot pricing of all transfer prices.
B)require forward pricing of all transfer prices.
C)review increases in transfer prices.
D)review decreases in transfer prices.

Accepted Answer

The Saudi government should review increases in transfer prices because MNCs may be adjusting transfer prices to decrease their income tax liability in Saudi Arabia.

Question 9

Taberet,a German firm,is concerned about export price escalation in its U.S.market.It should consider
A)increasing its transfer prices to the U.S.
B)promoting its products as luxury items.
C)joining a U.S.cartel.
D)joining a German cartel.

Accepted Answer

By promoting its products as luxury items, Taberet can justify a higher price point for its products in the U.S. market. This could allow the firm to maintain its profit margins while minimizing the impact of export price escalation. Increasing transfer prices may be seen as unfair to U.S. customers and could result in reduced demand for Taberet's products. Joining a cartel, whether in the U.S. or Germany, raises legal and ethical concerns and could damage the firm's reputation.

Question 10

Indopharm wishes to establish a pricing policy to avoid dumping charges in a small Asian country.Three global pharmaceutical firms export to the country,but there is no local manufacture of pharmaceuticals.Indopharm should
A)receive price approval from the local government.
B)be sure its prices are not much higher than the prices of the other MNCs.
C)be sure its prices are not much lower than the prices of the other MNCs.
D)None of the above

Accepted Answer

The answer of Indopharm wishes to establish a pricing policy...

Question 11

Taberet,a German company,has an Argentine marketing subsidiary that complains that export price escalation makes Taberet products too expensive to sell in Argentina.The subsidiary wants Taberet to adjust the transfer price to Argentina.What should Taberet do about the transfer price?
A)Decrease it.Transportation costs will decrease.
B)Decrease it.Tariff costs will decrease.
C)Decrease it.Transport and tariff costs will both decrease.
D)Do nothing.Transfer prices do not affect either transport or tariff costs.

Accepted Answer

Decreasing the transfer price can help reduce the tariff costs, as tariffs are often calculated based on the value of the goods being imported.

Question 12

Taberet,a German company,has been invited to join a cartel.What advice would you give the firm?
A)Do.It will increase your market coverage.
B)Do.It will decrease your costs.
C)Don't.It will cause your prices to decrease.
D)Don't.It's illegal.

Accepted Answer

Cartels are illegal as they are formed to restrict competition, control and fix prices, and ultimately harm consumers. Therefore, joining a cartel can lead to legal consequences such as fines or imprisonment. It is recommended that Taberet refrains from joining the cartel and instead focuses on ethical and legal ways to increase their market share and decrease costs.

Question 13

Tunetoy Industries,a U.S.MNC,has been invited to join a cartel.What advice would you give the firm?
A)Do.It will decrease your costs.
B)Do.It will increase your market coverage.
C)Don't.It will cause your prices to decrease.
D)Don't.It's illegal.

Accepted Answer

The best advice for Tunetoy Industries is to not join the cartel as it is illegal and can result in severe legal consequences. Cartel agreements are considered anti-competitive behaviors and can lead to hefty fines as well as damage the company's reputation. It is always better to compete fairly within the market and gain market share based on the company's strengths and competitive advantages rather than engaging in illegal activities.

Question 14

Latin Shoes wants to shut down parallel imports between France and Germany.Why might this be difficult to do?
A)France applies the national exhaustion principle.
B)Germany applies the national exhaustion principle.
C)The EU applies the international exhaustion principle.
D)The EU applies the regional exhaustion principle.

Accepted Answer

The EU applies the regional exhaustion principle, which means that once a product is sold within the EU, the rights holder cannot prevent its resale within the EU, making it difficult to shut down parallel imports between member states like France and Germany.

Question 15

Latin Shoes wants to shut down parallel imports into the Egyptian market.Why might this be difficult to do?
A)Egypt applies the national exhaustion principle.
B)Egypt applies the international exhaustion principle.
C)Shoes cannot be trademarked.
D)None of the above

Accepted Answer

Egypt applies the international exhaustion principle, which means that once a product has been legally sold anywhere in the world, the trademark owner's rights to control the distribution and resale of that product are exhausted. This makes it difficult for Latin Shoes to prevent parallel imports into the Egyptian market, as they cannot legally restrict the resale of their products once they have been sold legally elsewhere.

Question 16

Swiss Pharmaceuticals has a Malaysian marketing subsidiary that complains that export price escalation makes the firm's products too expensive to sell in Malaysia.The subsidiary wants Swiss Pharmaceuticals to lower the transfer price to Malaysia.Should the firm lower the transfer price?
A)Yes.It will decrease transportation costs.
B)No.International exhaustion laws forbid it.
C)No.National exhaustion laws forbid it.
D)None of the above.

Accepted Answer

The question does not provide enough information to determine whether the firm should lower the transfer price or not. Factors such as local competition and pricing, production costs, and potential loss of profits should also be considered. Additionally, there is no mention of exhaustion laws in this scenario, so options B and C can be eliminated. Option A may not always be the best choice as transportation costs are just one factor to consider in pricing decisions.

Question 17

Paris Pharmaceuticals,a French company,has been invited to join a cartel.What advice would you give the firm?
A)Don't.It's illegal.
B)Don't.It will cause your prices to decrease.
C)Do.It will decrease your costs.
D)Do.It will increase your market coverage.

Accepted Answer

Cartels are illegal and participating in one can result in severe legal consequences for the company and its employees. Therefore, the best advice is to not join the cartel.

Question 18

Action Toys markets toys for children and adults.When determining a pricing policy for its Middle East markets,the firm should consider
A)income of buyers.
B)discretionary income of buyers.
C)variable income of buyers.
D)independent income of buyers.

Accepted Answer

Discretionary income of buyers is the amount of income left after paying for essentials, which is crucial for determining how much consumers can spend on non-essential items like toys.

Question 19

Tottenham Tartans,a British clothing firm,is concerned about export price escalation in its Brazilian market.It should consider
A)establishing a cartel.
B)increasing its transfer prices to Brazil.
C)establishing price controls.
D)promoting its products as luxury items.

Accepted Answer

Promoting its products as luxury items would enable Tottenham Tartans to differentiate its brand from competitors and avoid being perceived as too expensive or being associated with cheaper, lower-quality alternatives. It would also allow the company to justify a higher price point and to target wealthy consumers who are less sensitive to price increases or exchange rate fluctuations. This would help mitigate the impact of price escalation in the Brazilian market and maintain profitability. The other options, such as establishing a cartel, increasing transfer prices, or establishing price controls, are illegal or unethical and may result in regulatory and reputational risks or penalties.

Question 20

Texas Tents,a U.S.firm,wants to stop parallel imports between Italy and Germany.Why might this be difficult to do?
A)Italy applies the national exhaustion principle.
B)Germany applies the national exhaustion principle.
C)The U.S.applies the national exhaustion principle.
D)None of the above

Accepted Answer

Both Italy and Germany are part of the European Union, which applies the regional exhaustion principle, making it difficult to stop parallel imports between member states.

Quiz 12: Pricing for International and Global Markets

The government of Indonesia is concerned that MNCs are adjusting transfer prices to their Indonesian subsidiaries in order to decrease tariff payments in Indonesia.The Indonesian government should

Tunetoy Industries is concerned about export price escalation for its personal computers in its Thai market.It should consider

Indopharm has a Bulgarian marketing subsidiary that complains that export price escalation makes the firm's products too expensive to sell in Bulgaria.The subsidiary wants the firm to adjust he transfer price to Bulgaria.What should Indopharm do about the transfer price?

The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease tariff payments in Saudi Arabia.The Saudi government should

The government of Thailand is concerned that MNCs are adjusting transfer prices to their Thai subsidiaries in order to decrease their income tax liability in Thailand.The Thai government should

Paris Pharmaceuticals wishes to establish a pricing policy to avoid dumping charges in a West African country.Three global pharmaceutical firms export to the country,but there is no local manufacture of pharmaceuticals.Paris Pharmaceuticals should

MabHill Corporation markets widgets to manufacturers worldwide and wishes to establish a pricing policy to avoid dumping charges in a Latin American country.Besides MabHill,3 MNCs export to the country.There is no local manufacture of widgets.What is wrong with this scenario?

The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease their income tax liability in Saudi Arabia.The Saudi government should

Taberet,a German firm,is concerned about export price escalation in its U.S.market.It should consider

Indopharm wishes to establish a pricing policy to avoid dumping charges in a small Asian country.Three global pharmaceutical firms export to the country,but there is no local manufacture of pharmaceuticals.Indopharm should

Taberet,a German company,has an Argentine marketing subsidiary that complains that export price escalation makes Taberet products too expensive to sell in Argentina.The subsidiary wants Taberet to adjust the transfer price to Argentina.What should Taberet do about the transfer price?

Taberet,a German company,has been invited to join a cartel.What advice would you give the firm?

Tunetoy Industries,a U.S.MNC,has been invited to join a cartel.What advice would you give the firm?

Latin Shoes wants to shut down parallel imports between France and Germany.Why might this be difficult to do?

Latin Shoes wants to shut down parallel imports into the Egyptian market.Why might this be difficult to do?

Swiss Pharmaceuticals has a Malaysian marketing subsidiary that complains that export price escalation makes the firm's products too expensive to sell in Malaysia.The subsidiary wants Swiss Pharmaceuticals to lower the transfer price to Malaysia.Should the firm lower the transfer price?

Paris Pharmaceuticals,a French company,has been invited to join a cartel.What advice would you give the firm?

Action Toys markets toys for children and adults.When determining a pricing policy for its Middle East markets,the firm should consider

Tottenham Tartans,a British clothing firm,is concerned about export price escalation in its Brazilian market.It should consider

Texas Tents,a U.S.firm,wants to stop parallel imports between Italy and Germany.Why might this be difficult to do?