Question 1

___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.
A) Cost minimizers
B) Market seekers
C) Raw-material seekers
D) High tech firms

Accepted Answer

C

Question 2

Which of the following is an example of reverse foreign investment for the U.S.?
A) Honda builds a factory in Ohio
B) Apple builds a plant in Ireland that exports to the United States
C) British Telecom issues new stock in the United States
D) American investors buy shares in Sony

Accepted Answer

Reverse foreign investment refers to a foreign company investing in the U.S. economy. Honda, a Japanese company, building a factory in Ohio is an example of this.

Question 3

Into which category of multinational is IBM most likely to fall?
A) raw materials seeker
B) market seeker
C) cost minimizer
D) all of the above

Accepted Answer

IBM is a multinational corporation that operates in a wide range of industries, including technology, consulting, and outsourcing. The company is headquartered in the United States, but it has operations in over 170 countries. IBM is most likely to fall into the category of a cost minimizer, as it has a global presence and can take advantage of lower costs in different countries.

Question 4

For the multinational corporation, which one of the following complements to the integration of world wide operations is MOST critical?
A) flexibility
B) adaptability
C) speed
D) economies of scale of distribution

Accepted Answer

The answer of For the multinational corporation, which one of...

Question 5

The multinational financial system enables companies to
A) avoid currency controls
B) reduce taxes
C) access lower cost financing sources
D) all of the above

Accepted Answer

The answer of The multinational financial system enables companies to
A)...

Question 6

According to the efficient market hypothesis, which one of the following is NOT correct?
A) markets place a premium on the future
B) today's stock price is the best predictor of tomorrow's stock price
C) stock prices reflect all available information
D) today's stock price incorporates the past history of prices

Accepted Answer

The efficient market hypothesis (EMH) posits that stock prices reflect all available information, making it impossible to consistently achieve higher returns than the overall market through stock selection or market timing. It suggests that today's stock price is the best predictor of tomorrow's stock price because it incorporates all known information, including the past history of prices. However, EMH does not imply that markets place a premium on the future; rather, it suggests that current prices are fair and reflect the collective market participants' expectations about the future.

Question 7

Critics of the multinational corporation would NOT fault its tendency to
A) shift production from one location to another in search of lower costs
B) avoid taxes
C) cause balance of payments difficulties
D) engage in environmental protection measures

Accepted Answer

Critics of the multinational corporation may fault its tendency to shift production to countries with lower labor and environmental standards, avoid taxes, and cause balance of payments difficulties. However, they would not fault its engagement in environmental protection measures. In fact, critics may argue that multinational corporations do not do enough to protect the environment or engage in green initiatives.

Question 8

Which of the following theories identifies specialization as the main reason for international business activity?
A) product life cycle theory of international trade
B) theory of diversification
C) doctrine of comparative advantage
D) theory of globalization

Accepted Answer

The doctrine of comparative advantage explains that countries engage in international trade to specialize in producing and exporting goods and services that have a lower opportunity cost, relative to other goods and services, compared to other countries. The theory of diversification suggests that firms engage in international business to reduce their risks by diversifying across different markets. The product life cycle theory of international trade explains how the life cycle of a product affects a firm's decision to engage in international trade. The theory of globalization focuses on the increasing interconnectedness of the world's economies and societies.

Question 9

According to the capital asset pricing model
A) only the systematic component of risk affects the required return
B) foreign investments whose returns are uncorrelated with the market's return should have a higher required return than comparable domestic investments
C) total risk of the investment is most relevant for small to medium-sized firms
D) diversification is secondary to risk levels of the investment

Accepted Answer

According to the capital asset pricing model, only the systematic component of risk affects the required return. The model assumes that investors are only concerned with systematic, non-diversifiable risk, which is measured by beta. Therefore, diversification is not relevant in this model, and foreign investments are not necessarily required to have a higher return than domestic investments. The total risk of the investment is also considered, as it impacts the volatility of the return, but only the systematic risk affects the required return.

Question 10

The primary objective of the multinational corporation is to
A) maximize shareholder wealth
B) maximize world production
C) minimize debt
D) minimize the cost of doing business globally

Accepted Answer

The answer of The primary objective of the multinational corporation...

Question 11

Which one of the following provides strong evidence that internationalization continues to grow in the world economy?
A) import restrictions by the Bush Administration on foreign steel
B) efforts suggested by politicians to restrict the sourcing of foreign products by locally headquartered multinationals
C) the growing volume of foreign direct investment by U.S. as well as other multinational companies
D) pressure on governments to embargo unfriendly nations

Accepted Answer

The growing volume of foreign direct investment by multinational companies indicates that internationalization continues to grow in the world economy. This shows that companies are increasingly investing in and operating in multiple countries, indicating a higher level of globalization. The other options are either measures aimed at restricting trade or politically-motivated and do not necessarily indicate overall trends in internationalization.

Question 12

Which of the following is NOT a failing of the theory of comparative advantage?
A) it ignores the role of uncertainty and economies of scale
B) it assumes that factors of production are relatively immobile
C) it assumes that there are no differentiated products
D) it deals with trade only differentiate rather than undifferentiated products

Accepted Answer

The theory of comparative advantage does not specifically deal with differentiated products; it assumes homogeneous goods.

Question 13

___________ were the earliest multinationals.

A) raw-material seekers
B) market seekers
C) cost minimizers
D) oil companies.

Accepted Answer

Raw-material seekers, such as the British East India Company and the Dutch East India Company, were the earliest multinationals. These companies were established in the 17th century and sought raw materials from colonies in Asia, Africa, and the Americas to bring back to Europe. They played a significant role in the expansion of global trade and the establishment of colonial empires.

Question 14

Historically, the primary motive for U.S. multinationals to produce abroad has been to
A) lower costs
B) respond more quickly to the marketplace
C) avoid trade barriers
D) gain tax benefits

Accepted Answer

The answer of Historically, the primary motive for U.S. multinationals...

Question 15

The internationalization process most likely tends to
A) proceed in a preprogrammed series of steps
B) begin by licensing foreign producers
C) inevitably involve foreign production
D) begin by exporting

Accepted Answer

The internationalization process most commonly begins by exporting, as it allows a company to test the waters in a foreign market without making a significant investment. While foreign production and licensing may be steps in the process, they are not necessarily the initial steps, and the process is not typically preprogrammed in a specific order.

Question 16

According to Shapiro, if you were the CEO of a multinational corporation, which of the following would be MOST important to you in hiring a manager? One that
A) Avoids risk at any price
B) Manages effectively the political environment of the subsidiary country
C) Anticipates every future disturbance related to the supply chain
D) Makes decisions that anticipates problems and provides solutions that enhances the firm's prospects for growth

Accepted Answer

A CEO of a multinational corporation would want a manager who can anticipate problems and provide solutions that enhance the firm's prospects for growth. This is because a multinational corporation operates in a complex global environment and needs to be able to adapt and respond to changing circumstances to remain competitive. Avoiding risk at any price is not feasible or desirable, as taking calculated risks can lead to growth and increased profitability. Managing the political environment is also important, but it is not the most important factor in hiring a manager. Anticipating every future disturbance related to the supply chain is important, but it is only one aspect of a manager's responsibilities.

Question 17

The ___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.
A) cost minimizers
B) market seekers
C) raw-material seekers
D) whaling companies

Accepted Answer

Market seekers are companies that expand overseas to sell their products in foreign markets. This fits the description of a modern multinational firm that produces and sells in foreign markets. Cost minimizers focus on efficiency and reducing production costs, while raw-material seekers primarily go overseas to secure access to natural resources. Whaling companies are not relevant to the topic of modern multinational firms.

Question 18

Multinational firms would most likely be
A) riskier than purely domestic firms because of the exposures of operating abroad
B) less risky than purely domestic firms because of international diversification
C) less risky than domestic firms if the added risks of operating overseas are more than offset by the ability to operate in nations whose economic cycles are not perfectly in phase
D) invested in developed countries only and avoid developing economies

Accepted Answer

Multinational firms may face added risks of operating abroad compared to purely domestic firms. However, international diversification may also reduce overall risk. Additionally, being able to operate in nations whose economic cycles are not perfectly in phase can also offset the risks of operating overseas. Therefore, multinational firms may be less risky than domestic firms if the benefits of international diversification and operating in different economic cycles outweigh the added risks of operating abroad. The statement that multinational firms only invest in developed countries and avoid developing economies is inaccurate as many multinational firms operate in both developed and developing economies.

Quiz 1: Introduction: Multinational Enterprise and Multinational Financial Management

___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.

Which of the following is an example of reverse foreign investment for the U.S.?

Into which category of multinational is IBM most likely to fall?

For the multinational corporation, which one of the following complements to the integration of world wide operations is MOST critical?

The multinational financial system enables companies to

According to the efficient market hypothesis, which one of the following is NOT correct?

Critics of the multinational corporation would NOT fault its tendency to

Which of the following theories identifies specialization as the main reason for international business activity?

According to the capital asset pricing model

The primary objective of the multinational corporation is to

Which one of the following provides strong evidence that internationalization continues to grow in the world economy?

Which of the following is NOT a failing of the theory of comparative advantage?

___________ were the earliest multinationals.

Historically, the primary motive for U.S. multinationals to produce abroad has been to

The internationalization process most likely tends to

According to Shapiro, if you were the CEO of a multinational corporation, which of the following would be MOST important to you in hiring a manager? One that

The ___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.

Multinational firms would most likely be