INTERNATIONAL BUSINESS:
OPPORTUNITIES AND CHALLENGES IN
A FLATTENING WORLD V5.0
QUESTIONS AND ANSWERS. VERIFIED
2026/2027
1. According to Thomas Friedman, which flattener involves the ability of companies to split
service and manufacturing activities into components which can be performed in the most
cost-efficient locations?
A. In-forming
B. Offshoring
C. Outsourcing
D. Supply-chaining
Answer: B
Conceptual Explanation: Offshoring refers to moving a functional process from one
country to another, typically to take advantage of lower costs, whereas outsourcing
involves contracting a specific function to a third party.
2. In Ghemawat’s CAGE framework, which distance category covers differences in religious
beliefs, social norms, and language?
A. Administrative Distance
,B. Economic Distance
C. Cultural Distance
D. Geographic Distance
Answer: C
Conceptual Explanation: Cultural distance encompasses the differences in social norms,
religious beliefs, and languages that influence how people from different countries interact.
3. Which trade theory argues that a country should specialize in producing goods for which it
has the lowest opportunity cost relative to other countries?
A. Comparative Advantage
B. Absolute Advantage
C. Mercantilism
D. Heckscher-Ohlin Theory
Answer: A
Conceptual Explanation: David Ricardo’s Theory of Comparative Advantage suggests that
trade is beneficial even if one country is less efficient in all goods, as long as it specializes
where it has the least disadvantage.
4. The ‘Leontief Paradox’ challenged which of the following international trade theories?
A. Mercantilism
B. Heckscher-Ohlin Theory
, C. Product Life Cycle Theory
D. National Competitive Advantage
Answer: B
Conceptual Explanation: Leontief found that the U.S. (a capital-abundant nation) exported
more labor-intensive goods, contradicting the Heckscher-Ohlin Theory which predicted
capital-intensive exports.
5. In the context of the Product Life Cycle Theory, during which stage does a product become
highly standardized and price-competitive?
A. Introduction Stage
B. Growth Stage
C. Maturity Stage
D. Standardized Product Stage
Answer: D
Conceptual Explanation: In the final stage, the product is standardized, production moves
to low-cost locations, and the original innovating country may become an importer.
6. Which of the following is NOT one of the four determinants of Michael Porter’s Diamond
Model of National Competitive Advantage?
A. Factor Conditions
B. Demand Conditions
OPPORTUNITIES AND CHALLENGES IN
A FLATTENING WORLD V5.0
QUESTIONS AND ANSWERS. VERIFIED
2026/2027
1. According to Thomas Friedman, which flattener involves the ability of companies to split
service and manufacturing activities into components which can be performed in the most
cost-efficient locations?
A. In-forming
B. Offshoring
C. Outsourcing
D. Supply-chaining
Answer: B
Conceptual Explanation: Offshoring refers to moving a functional process from one
country to another, typically to take advantage of lower costs, whereas outsourcing
involves contracting a specific function to a third party.
2. In Ghemawat’s CAGE framework, which distance category covers differences in religious
beliefs, social norms, and language?
A. Administrative Distance
,B. Economic Distance
C. Cultural Distance
D. Geographic Distance
Answer: C
Conceptual Explanation: Cultural distance encompasses the differences in social norms,
religious beliefs, and languages that influence how people from different countries interact.
3. Which trade theory argues that a country should specialize in producing goods for which it
has the lowest opportunity cost relative to other countries?
A. Comparative Advantage
B. Absolute Advantage
C. Mercantilism
D. Heckscher-Ohlin Theory
Answer: A
Conceptual Explanation: David Ricardo’s Theory of Comparative Advantage suggests that
trade is beneficial even if one country is less efficient in all goods, as long as it specializes
where it has the least disadvantage.
4. The ‘Leontief Paradox’ challenged which of the following international trade theories?
A. Mercantilism
B. Heckscher-Ohlin Theory
, C. Product Life Cycle Theory
D. National Competitive Advantage
Answer: B
Conceptual Explanation: Leontief found that the U.S. (a capital-abundant nation) exported
more labor-intensive goods, contradicting the Heckscher-Ohlin Theory which predicted
capital-intensive exports.
5. In the context of the Product Life Cycle Theory, during which stage does a product become
highly standardized and price-competitive?
A. Introduction Stage
B. Growth Stage
C. Maturity Stage
D. Standardized Product Stage
Answer: D
Conceptual Explanation: In the final stage, the product is standardized, production moves
to low-cost locations, and the original innovating country may become an importer.
6. Which of the following is NOT one of the four determinants of Michael Porter’s Diamond
Model of National Competitive Advantage?
A. Factor Conditions
B. Demand Conditions
