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International Business
Q:
A global standardization strategy makes most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal.
Q:
Firms that pursue an international strategy focus on increasing profitability by reaping the cost reductions that come from economies of scale, learning effects, and location economies.
Q:
Pressures for local responsiveness imply that it may not be possible to leverage skills and products associated with a firms core competencies wholesale from one nation to another.
Q:
Universal needs exist when the tastes and preferences of consumers in different nations are different.
Q:
Responding to pressures for cost reduction requires a firm to try to lower the costs of value creation.
Q:
Strategies that increase profitability can also expand a firm's business and thus enable it to attain a higher rate of profit growth.
Q:
One key to progressing downward on the experience curve is to decrease the volume produced by a single plant.
Q:
The firm that moves up the experience curve most rapidly will have a cost advantage vis--vis its competitors.
Q:
The ability to spread fixed costs over a large volume is one of the sources of economies of scale.
Q:
Learning effects will be more significant in an assembly process which involves 100 simple steps than in an assembly process which involves 1,000 complex steps.
Q:
The experience curve refers to systematic increase in production costs that have been observed to occur over the life of a product.
Q:
Location economies are the economies that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be.
Q:
Successful global expansion requires the transfer of core competencies to foreign markets where indigenous competitors lack them.
Q:
Firms that operate internationally are able to realize location economies by dispersing individual value creation activities to locations where they are performed most efficiently and effectively.
Q:
Processes are the manner in which decisions are made and work is performed within the organization.
Q:
The term organizational structure refers to the totality of a firm's organization, including organization architecture, control systems and incentives, organizational culture, processes, and people.
Q:
Maintaining the company infrastructure is a support activity.
Q:
The human resource function controls the transmission of physical materials through the value chain.
Q:
In terms of attaining a competitive advantage, support activities can be as important as the primary activities of the firm.
Q:
For services such as banking or health care, production typically occurs when the service is being designed by in-house professionals.
Q:
The various value creation activities that a firm undertakes are referred to as operations.
Q:
According to Michael Porter, all positions on the efficiency frontier are viable.
Q:
Diminishing returns imply that when a firm already has significant value built into its product offering, increasing value by a relatively small amount requires only minimal additional costs.
Q:
Superior value creation relative to rivals requires that the gap between the value and cost of production achieved by a company be lesser than the gap attained by its competitors.
Q:
A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost strategy.
Q:
The higher the firms profit per unit sold is, the greater its profitability will be, all else being equal.
Q:
The greater the consumer surplus, the lower the value for the money the consumer gets.
Q:
Consumer surplus captures some of the value of a product thereby reducing the price a firm can charges for it.
Q:
The price a firm charges for a good or service is typically more than the value placed on that good or service by the customer.
Q:
The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.
Q:
Profit growth is measured by the percentage increase in net profits over time.
Q:
The actions that managers take to attain the goals of the firm are referred to as a firm's strategy.
Q:
Which of the following is being used after the collapse of the fixed exchange rate system established at Bretton Woods?
A. Clean float exchange rate system
B. Managed-float system
C. Pegged exchange rate system
D. Gold standard system
E. Dirty float system
Q:
Which of the following observations about the International Development Association (IDA) scheme of the World Bank is true?
A. Money is raised through bond sales in the international capital market.
B. Borrowers have up to 50 years to repay at an interest rate of less than1 percent a year.
C. IDA loans go only to European countries.
D. Grants and interest-free loans are denied to governments of underdeveloped nations.
E. The bank offers loans only to customers with a satisfactory credit rating.
Q:
Which of the following is true of the International Bank for Reconstruction and Development (IBRD) scheme of the World Bank?
A. Resources to fund IBRD loans are raised through subscriptions from wealthy members.
B. The interest rate charged by the World Bank is higher than the commercial banks' market rate.
C. Borrowers have to pay the bank's cost of funds plus a margin for expenses.
D. The bank avoids offering low-interest loans to risky customers whose credit rating is often poor.
E. It was established to approve currency devaluations that are beyond 10 percent.
Q:
Which of the following is true according to the provisions of the Marshall plan?
A. The United States lent money directly to European nations to help them rebuild their economies.
B. Member countries of the International Monetary Fund were free to engage in competitive currency devaluations.
C. The World Bank lent funds to reconstruct the war-torn economies of Europe.
D. Money was lent to European countries under the International Bank for Reconstruction and Development scheme and the International Development Association scheme.
E. The World Bank lent money to the International Monetary Fund so that it could finance deficit-laden countries.
Q:
Which of the following was responsible for the World Bank shifting its focus from Europe to third world nations?
A. The Great Depression
B. The Jamaica agreement
C. World War II
D. The Marshall Plan
E. The Bretton Woods agreement
Q:
Which of the following was the initial mission of the World Bank?
A. Maintaining order in the international monetary system
B. Financing the building of Europe's economy by providing low-interest loans
C. Taking over as the successor to the International Monetary Fund
D. Reviving the gold standard system
E. Enforcement of the floating exchange rate system
Q:
Without currency devaluation, a country in "fundamental disequilibrium" would experience:
A. a persistent trade surplus.
B. a balance-of-payments equilibrium.
C. an increase in exports.
D. high unemployment.
E. deflation.
Q:
The system of adjustable parities allowed for the devaluation of a countrys currency by more than 10 percent if the International Monetary Fund (IMF) agreed that a:
A. country was in a trade surplus with the other member countries.
B. countrys balance of payments was in "fundamental disequilibrium."
C. country had achieved balance-of-trade equilibrium.
D. countrys imports were lower than its exports.
E. country was facing price inflation.
Q:
Which term was not defined in the International Monetary Fund's Articles of Agreement but was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products?
A. Competitive disadvantage
B. Capital flight
C. Fundamental disequilibrium
D. Break-even point
E. Diseconomies of scale
Q:
How does the International Monetary Fund (IMF) provide loans to deficit-laden countries?
A. It prints the required currencies, thereby increasing money supply in those countries.
B. It acts as a market, buying goods from these countries and selling it to developed countries.
C. A pool of gold and currencies contributed by its members provides the resources for the lending operations.
D. The World Bank lends the required amount to the IMF at a low interest rate.
E. It collects money from those countries that wish to devaluate their currencies.
Q:
Which of the following statements is true about the role of the International Monetary Fund?
A. It never interfered in the monetary and fiscal conditions of its member countries.
B. It was authorized to approve currency devaluations of only up to 10 percent.
C. It required member countries to adhere to specific agreements irrespective of the amount of funds the countries borrowed.
D. It lent money under the International Bank for Reconstruction and Development (IBRD) scheme and a second scheme which is overseen by the International Development Association (IDA).
E. It helped deficit-laden countries bring down inflation rates by providing short-term foreign currency loans.
Q:
The architects of the Bretton Woods agreement wanted to avoid high unemployment, so they built limited flexibility into the fixed exchange rate system. Which of the following is a major feature of the International Monetary Fund (IMF) Articles of Agreement that fostered this flexibility?
A. Competitive currency devaluations
B. Lending facilities
C. Communist ideologies
D. Floating exchange rates
E. Unrestricted authority to print currency
Q:
The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to:
A. avoid high unemployment.
B. facilitate competitive currency devaluations.
C. widen balance-of-payments gap between countries.
D. increase money supply and thereby price inflation.
E. avoid balance-of-trade equilibrium between countries.
Q:
Under a fixed exchange rate regime, what would be the result if a country rapidly increased its money supply by printing currency?
A. It would lead to increase in the worth of the currency.
B. The prices of imports would become more attractive in the country.
C. The countrys goods would be highly competitive in world markets.
D. Trade surplus in the country would increase.
E. It would lead to price deflation in the country.
Q:
An aspect of the Bretton Woods agreement was a commitment not to use:
A. the system of fixed exchange rates.
B. devaluation as a weapon of competitive trade policy.
C. gold as a measure to fix the value of currencies.
D. funds from the International Monetary Fund and the World Bank.
E. the U.S. dollar as a reference currency.
Q:
Which of the following observations is true of the Bretton Woods agreement?
A. The participating countries were required to exchange their currencies for gold.
B. Devaluation was accepted as a tool of competitive trade policy.
C. The agreement called for a system of floating exchange rates.
D. For weak currencies, devaluation of up to 10 percent was allowed without any formal approval by the International Monetary Fund.
E. A fixed exchange rate system was deemed impractical.
Q:
According to the Bretton Woods agreement of 1944, which was the only currency that remained convertible into gold?
A. U.S. dollar
B. British pound
C. Japanese yen
D. German deutsche mark
E. Chinese yuan
Q:
The objective of establishing the World Bank was to:
A. revive the gold standard.
B. promote general economic development.
C. control and manage the International Monetary Fund.
D. promote a floating exchange rate system.
E. approve large currency devaluations.
Q:
According to the _____ in 1944, all countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold.
A. Bretton Woods agreement
B. Washington Consensus
C. World Bank treaty
D. Group of Five treaty
E. United Nations agreement
Q:
Which of the following was a reason that led to the collapse of the gold standard in 1939?
A. Difficulty and complexity in using the gold standard to determine the exchange rate
B. Agreement by governments to convert paper currency into gold on demand at a fixed rate
C. A cycle of competitive currency devaluations by various countries
D. Expansion in the volume of international trade in the wake of the Industrial Revolution
E. The inability of the gold standard to act as a mechanism for achieving balance-of-trade equilibrium by all countries
Q:
Argonia Republic is in trade surplus with Kamboly. Under the gold standard, which of the following statements is true until a balance-of-trade equilibrium is achieved?
A. There will be a net flow of gold from Argonia Republic to Kamboly
B. The money supply in Kamboly will reduce due to the flow of gold to Argonia Republic
C. The prices of the traded goods in Kamboly will increase
D. The demand for traded goods in Argonia Republic will increase
E. Kamboly will start to buy more goods from Argonia Republic
Q:
Certovia and Norkland are two neighboring countries that actively trade goods and services with each other. Under the gold standard, there will be a net flow of gold from Norkland to Certovia when:
A. Certovia is in trade deficit with Norkland.
B. Norkland is in balance-of-trade equilibrium with Certovia.
C. Certovia is in trade surplus with Norkland.
D. Certovia imports more than it exports to Norkland.
E. Norklands balance of payment to Certovia is favorable.
Q:
In the 1930s, confidence in the _____ was shattered because countries were devaluing their currencies at will in order to boost exports.
A. floating exchange rate system
B. gold standard system
C. fixed exchange system
D. Bretton Woods system
E. managed-float system
Q:
Which of the following statements is true about the gold standard?
A. Given a common gold standard, the value of any currency in units of any other currency was easy to determine.
B. Establishing a gold standard seemed impractical as the volume of international trade expanded in the wake of the Industrial Revolution.
C. A drawback of the gold standard was that it failed to provide a mechanism for achieving balance-of-trade equilibrium by all countries.
D. Under the gold standard, when a country has a trade deficit, there will be a net flow of gold from the other countries to that country.
E. The gold standard refers to the use of gold coins as a medium of exchange between countries involved in international trade.
Q:
Which of the following is a great strength of the gold standard?
A. It helped establish the dollar as a predominant vehicle currency.
B. It helped governments raise foreign exchange reserves thereby increasing economic stability.
C. It contained a powerful mechanism for achieving balance-of-trade equilibrium by all countries.
D. It helped reduce inflation to near-zero levels in all countries engaged in international trade.
E. It helped to establish a common currency across the globe to fund international trade.
Q:
A country is said to be in _____ when the income its residents earn from exports is equal to the money its residents pay to other countries for imports.
A. a currency crisis
B. balance-of-trade equilibrium
C. balance-of-payments deficit
D. a banking crisis
E. free trade area
Q:
In terms of the gold standard, the amount of currency needed to purchase one ounce of gold was referred to as the _____.
A. gold to bond ratio
B. gold reserve ratio
C. gold mix ratio
D. gold par value
E. gold net value
Q:
Which of the following is a reason for the emergence of the gold standard?
A. Expansion in the volume of international trade due to the Industrial Revolution
B. Inability of governments to convert gold into paper currency on demand at a fixed rate
C. Widening gap between the developed and the developing nations
D. Failure of the Bretton Woods fixed exchange rate system
E. Failure of the U.S. dollar to act as a reference currency
Q:
Which of the following refers to the gold standard?
A. Pegging currencies to gold and guaranteeing convertibility
B. Conducting international trade by physically exchanging gold
C. The most valuable currency in the world at any given point in time
D. The common global standard of gold quality to be maintained
E. The quality of merchandise to be maintained for it to be exportable
Q:
The 1944 Bretton Woods system called for _____ exchange rates against the U.S. dollar.
A. flexible
B. floating
C. fixed
D. dirty float
E. pegged
Q:
The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary systemthe International Monetary Fund (IMF) and the _____.
A. United Nations
B. European Union
C. World Trade Organization
D. World Bank
E. G20
Q:
The values of a set of currencies are set against each other at some mutually agreed on exchange rate in a _____ exchange rate system.
A. clean float
B. floating
C. fixed
D. dirty float
E. pegged
Q:
The ____ refers to a system to regulate fixed exchange rates before the introduction of the euro.
A. European Free Trade Association
B. European Monetary System
C. international monetary system
D. International Finance Corporation
E. European Federation of Accountants
Q:
Which of the following statements is true about the various exchange rate systems?
A. In a fixed exchange rate system, the value of a currency is adjusted according to the day to day market forces.
B. In a clean float, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency.
C. After the collapse of the Bretton Woods system of floating exchange rates in 1973, the world has operated with a fixed exchange rate system.
D. According to the Bretton Woods system, the value of most currencies in terms of U.S. dollars was allowed to change only under a specific set of circumstances.
E. In dirty float, the exchange rate between a currency and other currencies is relatively fixed against a reference currency exchange rate.
Q:
_____ refers to a system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.
A. Fixed float
B. Clean float
C. Pegged float
D. Dirty float
E. Capital float
Q:
In a floating exchange rate, the relative value of a currency:
A. is more predictable and less volatile.
B. is determined by market forces.
C. changes infrequently only under a specific set of circumstances.
D. is set against other currencies at some mutually agreed on exchange rate.
E. does not depend on the free play of market forces.
Q:
Many of the worlds developing nations peg their currencies, primarily to the _____.
A. U.S. dollar
B. Saudi riyal
C. Japanese yen
D. Chinese yuan
E. German deutsche marks
Q:
A _____ means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.
A. flexible exchange rate
B. pegged exchange rate
C. real exchange rate
D. dirty float exchange rate
E. floating exchange rate
Q:
_____ refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.
A. Fixed exchange rate
B. Floating exchange rate
C. Flexible exchange rate
D. Pegged exchange rate
E. Nominal exchange rate
Q:
Which of the following refers to the institutional arrangements that govern exchange rates?
A. Generally accepted accounting principles
B. General agreement on tariffs and trade
C. International monetary system
D. General agreement on trade in services
E. Financial management information system
Q:
Contracting out manufacturing may be more appropriate for high-value-added manufacturing.
Q:
In the face of unpredictable exchange rate movements, a firm should pursue strategies that reduce its economic exposure.
Q:
The forward exchange market is an accurate predictor of future exchange rates.
Q:
Some economists argue that higher inflation rates might be good if the consequence is greater growth in aggregate demand.
Q:
The International Monetary Fund can force countries to adopt the policies required to correct economic mismanagement.
Q:
A benefit of the International Monetary Fund is that it does not have a mechanism for accountability.
Q:
All International Monetary Fund loan packages come with conditions attached.
Q:
At times, elements of currency, banking, and debt crises may be present simultaneously in a region.