INTERNATIONAL FINANCE THEORY AND
POLICY COMPREHENSIVE EXAMINATION
TEST VERIFIED QUESTIONS AND
ACCURATE ANSWERS
●● Agency Problems
Answer: conflict of goals between a firm's managers and its shareholders
●● Agency Costs
Answer: costs of ensuring that managers maximize shareholder wealth
(larger for multinational corporations due to difficulty of monitoring
over long distances)
●● International Business Theories
Answer: 1. Theory of Comparative Advantage
2. Imperfect Markets Theory
3. Product Cycle Theory
●● Theory of Comparative Advantage
Answer: countries specialize in certain products and rely on trade for
others that they can't produce as efficiently (due to climate or other
restrictions)
, ●● Imperfect Markets Theory
Answer: factors of production are somewhat immobile (costs and
restrictions related to transfer of labor and other resources used for
production)
- provides incentive to seek out foreign opportunity
●● Product Cycle Theory
Answer: - firms first become established in their home market as a result
of some perceived advantage
- foreign demand accommodated by exporting and potentially moving
production to foreign countries to reduce transportation costs
●● International Trade
Answer: - exporting to penetrate foreign markets
- importing to obtain material from low cost suppliers
●● Licensing
Answer: obligates a firm to provide its technology in exchange for fees
or other benefits (Ex. Starbucks technology in trains)
●● Franchising
Answer: obligates a firm to provide a sales/service strategy, support
assistance, and an initial investment in return for periodic fees
POLICY COMPREHENSIVE EXAMINATION
TEST VERIFIED QUESTIONS AND
ACCURATE ANSWERS
●● Agency Problems
Answer: conflict of goals between a firm's managers and its shareholders
●● Agency Costs
Answer: costs of ensuring that managers maximize shareholder wealth
(larger for multinational corporations due to difficulty of monitoring
over long distances)
●● International Business Theories
Answer: 1. Theory of Comparative Advantage
2. Imperfect Markets Theory
3. Product Cycle Theory
●● Theory of Comparative Advantage
Answer: countries specialize in certain products and rely on trade for
others that they can't produce as efficiently (due to climate or other
restrictions)
, ●● Imperfect Markets Theory
Answer: factors of production are somewhat immobile (costs and
restrictions related to transfer of labor and other resources used for
production)
- provides incentive to seek out foreign opportunity
●● Product Cycle Theory
Answer: - firms first become established in their home market as a result
of some perceived advantage
- foreign demand accommodated by exporting and potentially moving
production to foreign countries to reduce transportation costs
●● International Trade
Answer: - exporting to penetrate foreign markets
- importing to obtain material from low cost suppliers
●● Licensing
Answer: obligates a firm to provide its technology in exchange for fees
or other benefits (Ex. Starbucks technology in trains)
●● Franchising
Answer: obligates a firm to provide a sales/service strategy, support
assistance, and an initial investment in return for periodic fees
