a) Licensing
b) Exporting
c) Setting up local facilities
d) Setting up a foreign sales office
Ans: b
Section: The Process of Overseas Expansion by Multinationals
Level: Medium
1.23 Which of the following is generally a licensing rather that an exporting opportunity for a multinational looking to expand globally?
a) The firm has a product that can be shipped without adaptation.
b) The firm is seeking to market a specific product or process technology that can be written down and transmitted objectively.
c) The firm has a product such as a new device that is technologically advanced.
d) A firm that has a specialized cost-saving equipment.
Ans: B
Section: The Process of Overseas Expansion by Multinationals
Level: Medium
1.24 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
Ans: c
Section: rise of the multinational
Level: Difficult
1.25 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
Ans: d
Section: criticisms of the MNC
Level: Difficult
1.26 Multinational firms
a) are riskier than purely domestic firms because of the exposures of operating abroad
b) are less risky than purely domestic firms because of international diversification
c) may be 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) invest in developed countries only and avoid developing economies
Ans: c
Section: the importance of total risk
Level: Difficult
1.27 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
Ans: a
Section: capital asset pricing
Level: Difficult
1.28 The internationalization process tends to
a) proceed in a preprogrammed series of steps
b) begin by licensing foreign producers
c) inevitably involve foreign production
d) often begin by accident
Ans: d
Section: capital asset pricing
Level: Difficult
1.29 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
Ans: a
Section: market efficiency
Level: Difficult
1.30 Which one of the following provides strong evidence that internationalization continues to grow in the world economy?
- import restrictions by the Bush Administration on foreign steel
- efforts suggested by politicians to restrict the sourcing of foreign products by locally headquartered multinationals
- the growing volume of foreign direct investment by U.S. as well as other multinational companies
- pressure on governments to embargo unfriendly nations
Ans: c
Section: Evolution of the Multinational Corporation
Level: Difficult
1.31 For the multinational corporation, which one of the following complements to the integration of worldwide operations is MOST critical?