Multinational Business Finance 15th Global Edition by David K. Eiteman test bank

AACSB:  Application of knowledge
 

16) As the general principle of comparative advantage is still valid, complete specialization remains a realistic case.
Answer:  FALSE
Diff: 2
L.O.:  1.2 The Theory of Comparative Advantage
Skill:  Recognition
AACSB:  Application of knowledge
 
17) Although international trade might have approached the comparative advantage model during the nineteenth century, it certainly does not today, for a variety of reasons. Develop an argument as to why this is not happening today.
Answer:  Countries do not appear to specialize only in those products that could be most efficiently produced by that country's particular factors of production. Instead, governments interfere with comparative advantage for a variety of economic and political reasons, such as to achieve full employment, economic development, national self-sufficiency in defense-related industries, and protection of an agricultural sector's way of life. Government interference takes the form of tariffs, quotas, and other non-tariff restrictions. The classical model of comparative advantage also did not really address certain other issues such as the effect of uncertainty and information costs, the role of differentiated products in imperfectly competitive markets, and economies of scale.
Diff: 1
L.O.:  1.2 The Theory of Comparative Advantage
Skill:  Conceptual
AACSB:  Application of knowledge
 
1.3  What Is Different About International Financial Management?
 
1) Which of the following domestic financial instruments have NOT been modified for use in international financial management?
A) currency options and futures
B) interest rate and currency swaps
C) letters of credit
D) All of the above are domestic financial instruments that have also been modified for use in international financial markets.
Answer:  D
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 

2) Which of the following is NOT always understood by MNE management?
A) culture, history, and institutions
B) political risk
C) foreign exchange risk
D) financial instruments
Answer:  A
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
3) In determining why a firm becomes multinational there are many reasons. One reason is that the firm is a market seeker. Which of the following is NOT a reason why market-seeking firms produce in foreign countries?
A) satisfaction of local demand in the foreign country
B) to export to foreign markets
C) political safety and small likelihood of government expropriation of assets
D) All of the above are market-seeking activities.
Answer:  C
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
4) ________ investments are designed to promote and enhance the growth and profitability of the firm. ________ investments are designed to deny those same opportunities to the firm's competitors.
A) Conservative; Aggressive
B) Defensive; Proactive
C) Proactive; Defensive
D) Aggressive; Proactive
Answer:  C
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 

5) In determining why a firm becomes multinational there are many reasons. One reason is that the firm is a raw material seeker. Which of the following is NOT a reason why raw material seeker extract raw materials in foreign countries?
A) They extract raw materials wherever they can be found to export from the host country.
B) They extract raw materials wherever they can be found for sale in the host country.
C) They extract raw materials wherever they can be found for further processing in the host country.
D) All of the above.
Answer:  D
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
6) MNEs must modify finance theories like cost of capital and capital budgeting because of foreign complexities.
Answer:  TRUE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
7) Relative to MNEs, purely domestic firms tend to have GREATER political risk.
Answer:  FALSE