c. its technology; its technology
d. a specialized sales or service strategy; a specialized sales or service strategy
e. its technology; an initial investment
ANSWER: b
60. A U.S.-based MNC has many foreign subsidiaries in Europe and does not expect to increase its investment there. Its value should increase if the value of the euro weakens over time.
a. True
b. False
ANSWER: False
61. If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they automatically maximize the value of the entire corporation.
a. True
b. False
ANSWER: False
62. A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary's operations.
a. True
b. False
ANSWER: True
63. U.S.-based MNCs are typically not monitored by mutual funds and pension funds, as these institutions rarely hold stock in MNCs.
a. True
b. False
ANSWER: False
64. The Sarbanes-Oxley Act ensures a more transparent process for managers to report on the productivity and financial condition of their firm.
a. True
b. False
ANSWER: True
65. The theory of comparative advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.
a. True
b. False
ANSWER: False
66. Under the imperfect markets theory, it is assumed that factors of production are entirely mobile, so that firms can capitalize on a foreign country's resources.
a. True
b. False
ANSWER: False
67. Under the product cycle theory, foreign demand can be initially satisfied by exporting.
a. True
b. False
ANSWER: True
68. Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.
a. True
b. False
ANSWER: True
69. International trade is the most common form of direct foreign investment (DFI).
a. True
b. False
ANSWER: False
70. When the parent's home currency is weak, remitted funds from foreign subsidiaries will convert to a smaller amount of the home currency.
a. True
b. False
ANSWER: False
71. A purely domestic firm may be affected by exchange rate fluctuations if it faces at least some foreign competition.
a. True
b. False
ANSWER: True
72. One form of exposure to political risk is terrorism.
a. True
b. False
ANSWER: True
73. The goal of an MNC is to:
a. minimize taxes on funds remitted from foreign subsidiaries.
b. establish subsidiaries in any country where operations would provide a return over and above the cost of capital, even if better projects are available domestically.
c. maximize shareholder wealth.
d. maximize the social benefits resulting from actions such as the employment of foreign managers.
ANSWER: c
74. Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:
a. monitoring of managers located in foreign countries is more difficult.
b. foreign subsidiary managers raised in different cultures may not follow uniform goals.
c. MNCs are relatively large.
d. All of these are correct.
e. monitoring of managers located in foreign countries is more difficult AND foreign subsidiary managers raised in different cultures may not follow uniform goals.
ANSWER: d
75. Which of the following is not one of the more common methods used by MNCs to improve their internal control process?
a. establishing a centralized database of information
b. ensuring that all data are reported consistently among subsidiaries