References
Multiple Choice Difficulty: 1 Easy
10.
Award: 1.00 point
11.
Award: 1.00 point
Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso depreciates drastically
against the U.S. dollar, as it did in December 1994. This means that
your company's products can be priced out of the Mexican market, as the peso price of American imports will
rise following the peso's fall.
your firm will be able to charge more in dollar terms while keeping peso prices stable.
your domestic competitors will enjoy a period of facing little price competition from Mexican imports.
none of the options
References
Multiple Choice Difficulty: 1 Easy
Suppose that you are a U.S. producer of a commodity good competing with foreign producers. Your inputs of production
are priced in dollars and you sell your output in dollars. If the U.S. currency depreciates against the currencies of our
trading partners,
your competitive position is likely improved.
your competitive position is likely worsened.
your competitive position is unchanged.
none of the options
References
Multiple Choice Difficulty: 1 Easy
12.
Award: 1.00 point
13.
Award: 1.00 point
14.
Award: 1.00 point
Undoubtedly, we are now living in a world where all the major economic functions—consumption, production, and
investment—
are still inherently local.
are still regional in nature.
are slowly becoming globalized.
are highly globalized.
References
Multiple Choice Difficulty: 1 Easy
Most governments at least try to make it difficult for people to cross their borders illegally. This barrier to the free
movement of labor is an example of
information asymmetry.
excessive transactions costs.
racial discrimination.
a market imperfection.
References
Multiple Choice Difficulty: 1 Easy
Although the world economy is much more integrated today than was the case 10 or 20 years ago, a variety of barriers still
hamper free movements of people, goods, services, and capital across national boundaries. These barriers include
legal restrictions.
excessive transportation costs.
information asymmetry.
all of the options
References
Multiple Choice Difficulty: 1 Easy
15.
Award: 1.00 point
16.
Award: 1.00 point
17.
Award: 1.00 point
The Japanese automobile company Honda decided to establish production facilities in Ohio, mainly to
circumvent trade barriers.
reduce transportation costs.
reduce transactions costs.
all of the options
References
Multiple Choice Difficulty: 1 Easy
When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios
internationally,
they trade one market imperfection, information asymmetry, for another, exchange rate risk.
they benefit from an expanded opportunity set.
they should not bother to read or to understand the prospectus, since it’s probably written in a foreign language.
they should invest only in dollars or euros.
References
Multiple Choice Difficulty: 1 Easy
The Nestlé Corporation, a well-known Swiss MNC, used to issue two different classes of common stock, bearer shares and
registered shares, and foreigners were allowed to hold only
registered shares.
bearer shares.
voting shares.
convertible shares.
References
Multiple Choice Difficulty: 1 Easy
18.
Award: 1.00 point
19.
Award: 1.00 point
Deregulated financial markets and heightened competition in financial services provided an environment for financial
innovations that resulted in the introduction of various instruments. Examples of these innovative instruments include
currency futures and options, foreign stock index futures and options.
multicurrency bonds.
international mutual funds, country funds, exchange traded funds.
all of the options
References
Multiple Choice Difficulty: 1 Easy
Nestlé, a well-known Swiss corporation,
has been a paragon of virtue in its opposition to all forms of political risk.
at one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, the total
market value of the firm fell.