IBUS 401 - Quiz 1 UPDATED ACTUAL
Exam Questions and CORRECT Answers
As a US resident, a _________________ dollar indicates cheaper imported goods. - CORRECT
ANSWER - stronger
As a US resident, a _________________ dollar indicates more expensive imported goods. -
CORRECT ANSWER - weaker
Agency Cost - CORRECT ANSWER - cost of ensuring that managers maximize
shareholder wealth
MNCs usually have ______________ agency cost. Why? - CORRECT ANSWER -
Higher, for several reasons:
- monitoring managers of distant subsidiaries in foreign countries is more difficult
- foreign subsidiary managers raised in different cultures may not follow uniform goals
- sheer size of larger MNCs can create large agency problems
- some non-US managers tend to downplay the short-term effects of decisions
Theories of International Business - CORRECT ANSWER - 1. Theory of Competitive
Advantage
2. Imperfect Market Theory
3. Product Cycle Theory
Theory of Competitive Advantage - CORRECT ANSWER - Specialization increases
production efficiency. (a country does something better than another country so you should do
work with them)
Imperfect Markets Theory - CORRECT ANSWER - Factors of production are somewhat
immobile providing incentive to seek out foreign opportunities
, Product Cycle Theory - CORRECT ANSWER - As a firm matures, it recognizes
opportunities outside its domestic market. Ex: moving VA factory to Thaiwan - outsourcing)
How firms engage in international business - CORRECT ANSWER - 1. International
Trade
2. Licensing
3. Franchising
4. Joint Ventures
5. Acquisitions of existing operations
6. Establishing new foreign subsidiaries
International Trade - CORRECT ANSWER - Penetrating markets by exporting and
obtaining supplies at a low cost by importing.
Licensing - CORRECT ANSWER - Allow another company to use your know-how and
they pay for it.
Franchising - CORRECT ANSWER - Firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the franchise in exchange for
periodic fees (will teach you how to do everything for money)
Joint Ventures - CORRECT ANSWER - Two or more companies form a venture and own
that company. Problem - somebody owns more than the other, problem if you are the minority
party)
Acquisitions of existing operations - CORRECT ANSWER - Go and buy business outside
of country. Allows firms to have full control over their foreign businesses and to quickly obtain a
large portion of foreign market share.
Exam Questions and CORRECT Answers
As a US resident, a _________________ dollar indicates cheaper imported goods. - CORRECT
ANSWER - stronger
As a US resident, a _________________ dollar indicates more expensive imported goods. -
CORRECT ANSWER - weaker
Agency Cost - CORRECT ANSWER - cost of ensuring that managers maximize
shareholder wealth
MNCs usually have ______________ agency cost. Why? - CORRECT ANSWER -
Higher, for several reasons:
- monitoring managers of distant subsidiaries in foreign countries is more difficult
- foreign subsidiary managers raised in different cultures may not follow uniform goals
- sheer size of larger MNCs can create large agency problems
- some non-US managers tend to downplay the short-term effects of decisions
Theories of International Business - CORRECT ANSWER - 1. Theory of Competitive
Advantage
2. Imperfect Market Theory
3. Product Cycle Theory
Theory of Competitive Advantage - CORRECT ANSWER - Specialization increases
production efficiency. (a country does something better than another country so you should do
work with them)
Imperfect Markets Theory - CORRECT ANSWER - Factors of production are somewhat
immobile providing incentive to seek out foreign opportunities
, Product Cycle Theory - CORRECT ANSWER - As a firm matures, it recognizes
opportunities outside its domestic market. Ex: moving VA factory to Thaiwan - outsourcing)
How firms engage in international business - CORRECT ANSWER - 1. International
Trade
2. Licensing
3. Franchising
4. Joint Ventures
5. Acquisitions of existing operations
6. Establishing new foreign subsidiaries
International Trade - CORRECT ANSWER - Penetrating markets by exporting and
obtaining supplies at a low cost by importing.
Licensing - CORRECT ANSWER - Allow another company to use your know-how and
they pay for it.
Franchising - CORRECT ANSWER - Firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the franchise in exchange for
periodic fees (will teach you how to do everything for money)
Joint Ventures - CORRECT ANSWER - Two or more companies form a venture and own
that company. Problem - somebody owns more than the other, problem if you are the minority
party)
Acquisitions of existing operations - CORRECT ANSWER - Go and buy business outside
of country. Allows firms to have full control over their foreign businesses and to quickly obtain a
large portion of foreign market share.
