SOM 354 FINAL NADIM questions well
answered already passed
T/F
When a firm enters into a spot exchange contract, it is taking out insurance against adverse
future exchange rate movements. - correct answer ✔✔FALSE
T/F
When companies wish to convert currencies, they typically enter the foreign exchange market
directly. - correct answer ✔✔FALSE
T/F
If the law of one price were true for all goods and services, the purchasing power parity (PPP)
exchange rate could be found from any individual set of prices. - correct answer ✔✔TRUE
T/F
In the context of The Economist's "Big Mac Index," assume that the average price of a Big Mac
in South Korea is $2.98 at the prevailing won/dollar exchange rate. The average price of a Big
Mac in the United States is $3.58. This suggests that the Korean won is overvalued against the
U.S. dollar. - correct answer ✔✔FALSE
T/F
When residents and nonresidents rush to convert their holdings of domestic currency into a
foreign currency, the phenomenon is generally referred to as capital flight. - correct answer
✔✔TRUE
T/F
,In a fixed exchange rate system, the central bank of a country will intervene in the foreign
exchange market to try to maintain the value of its currency if it depreciates too rapidly against
an important reference currency. - correct answer ✔✔FALSE
T/F
The major problem with the gold standard was that no multinational institution could stop
countries from engaging in competitive devaluations. - correct answer ✔✔FALSE
T/F
A country that introduces a currency board commits itself to converting its domestic currency
on demand into another currency at a fixed exchange rate. - correct answer ✔✔TRUE
T/F
Under a currency board system, the government has the absolute authority to set interest rates.
- correct answer ✔✔FALSE
T/F
In the face of unpredictable exchange rate movements, a firm should pursue strategies that
reduce its economic exposure. - correct answer ✔✔TRUE
T/F
Profit growth is measured by the percentage increase in net profits over time. - correct answer
✔✔TRUE
T/F
A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a
low-cost strategy. - correct answer ✔✔FALSE
T/F
,Maintaining the company infrastructure is a support activity - correct answer ✔✔TRUE
T/F
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. - correct answer ✔✔FALSE
T/F
Universal needs exist when the tastes and preferences of consumers in different nations are
different. - correct answer ✔✔FALSE
T/F
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. -
correct answer ✔✔FALSE
T/F
A global standardization strategy makes most sense when there are strong pressures for cost
reductions and demands for local responsiveness are minimal. - correct answer ✔✔TRUE
T/F
According to researchers, firms facing strong pressures for local responsiveness should pursue a
global standardization strategy. - correct answer ✔✔FALSE
T/F
An international strategy involves taking products first produced for their domestic market and
selling them internationally with only minimal local customization. - correct answer ✔✔TRUE
T/F
, A firm contemplating expansion should choose a foreign market based on an assessment of the
nation's long-run profit potential. - correct answer ✔✔TRUE
T/F
In international business, a strategic commitment has a short-term impact and is easily
reversible. - correct answer ✔✔FALSE
T/F
A risk-averse international firm that enters a foreign market on a small scale will increase its
potential losses. - correct answer ✔✔FALSE
T/F
Firms pursuing global standardization or transnational strategies tend to prefer setting up
wholly owned marketing subsidiaries. - correct answer ✔✔TRUE
Franchising, a mode of entry into a foreign market, helps firms exert greater quality control over
franchises in foreign locations. - correct answer ✔✔FALSE
ex: A significant disadvantage of franchising is quality control. Foreign franchisees may not be as
concerned about quality as they are supposed to be, and the result of poor quality can extend
beyond lost sales in a particular foreign market to a decline in the firm's worldwide reputation.
T/F
In terms of the various modes of entry into a foreign market, franchising is employed primarily
by service firms, whereas licensing is pursued primarily by manufacturing firms. - correct answer
✔✔TRUE
ex: In terms of the various modes of entry into a foreign market, licensing is pursued primarily
by manufacturing firms, whereas franchising is employed primarily by service firms. Franchising
is similar to licensing, although franchising tends to involve longer-term commitments than
licensing.
answered already passed
T/F
When a firm enters into a spot exchange contract, it is taking out insurance against adverse
future exchange rate movements. - correct answer ✔✔FALSE
T/F
When companies wish to convert currencies, they typically enter the foreign exchange market
directly. - correct answer ✔✔FALSE
T/F
If the law of one price were true for all goods and services, the purchasing power parity (PPP)
exchange rate could be found from any individual set of prices. - correct answer ✔✔TRUE
T/F
In the context of The Economist's "Big Mac Index," assume that the average price of a Big Mac
in South Korea is $2.98 at the prevailing won/dollar exchange rate. The average price of a Big
Mac in the United States is $3.58. This suggests that the Korean won is overvalued against the
U.S. dollar. - correct answer ✔✔FALSE
T/F
When residents and nonresidents rush to convert their holdings of domestic currency into a
foreign currency, the phenomenon is generally referred to as capital flight. - correct answer
✔✔TRUE
T/F
,In a fixed exchange rate system, the central bank of a country will intervene in the foreign
exchange market to try to maintain the value of its currency if it depreciates too rapidly against
an important reference currency. - correct answer ✔✔FALSE
T/F
The major problem with the gold standard was that no multinational institution could stop
countries from engaging in competitive devaluations. - correct answer ✔✔FALSE
T/F
A country that introduces a currency board commits itself to converting its domestic currency
on demand into another currency at a fixed exchange rate. - correct answer ✔✔TRUE
T/F
Under a currency board system, the government has the absolute authority to set interest rates.
- correct answer ✔✔FALSE
T/F
In the face of unpredictable exchange rate movements, a firm should pursue strategies that
reduce its economic exposure. - correct answer ✔✔TRUE
T/F
Profit growth is measured by the percentage increase in net profits over time. - correct answer
✔✔TRUE
T/F
A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a
low-cost strategy. - correct answer ✔✔FALSE
T/F
,Maintaining the company infrastructure is a support activity - correct answer ✔✔TRUE
T/F
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. - correct answer ✔✔FALSE
T/F
Universal needs exist when the tastes and preferences of consumers in different nations are
different. - correct answer ✔✔FALSE
T/F
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. -
correct answer ✔✔FALSE
T/F
A global standardization strategy makes most sense when there are strong pressures for cost
reductions and demands for local responsiveness are minimal. - correct answer ✔✔TRUE
T/F
According to researchers, firms facing strong pressures for local responsiveness should pursue a
global standardization strategy. - correct answer ✔✔FALSE
T/F
An international strategy involves taking products first produced for their domestic market and
selling them internationally with only minimal local customization. - correct answer ✔✔TRUE
T/F
, A firm contemplating expansion should choose a foreign market based on an assessment of the
nation's long-run profit potential. - correct answer ✔✔TRUE
T/F
In international business, a strategic commitment has a short-term impact and is easily
reversible. - correct answer ✔✔FALSE
T/F
A risk-averse international firm that enters a foreign market on a small scale will increase its
potential losses. - correct answer ✔✔FALSE
T/F
Firms pursuing global standardization or transnational strategies tend to prefer setting up
wholly owned marketing subsidiaries. - correct answer ✔✔TRUE
Franchising, a mode of entry into a foreign market, helps firms exert greater quality control over
franchises in foreign locations. - correct answer ✔✔FALSE
ex: A significant disadvantage of franchising is quality control. Foreign franchisees may not be as
concerned about quality as they are supposed to be, and the result of poor quality can extend
beyond lost sales in a particular foreign market to a decline in the firm's worldwide reputation.
T/F
In terms of the various modes of entry into a foreign market, franchising is employed primarily
by service firms, whereas licensing is pursued primarily by manufacturing firms. - correct answer
✔✔TRUE
ex: In terms of the various modes of entry into a foreign market, licensing is pursued primarily
by manufacturing firms, whereas franchising is employed primarily by service firms. Franchising
is similar to licensing, although franchising tends to involve longer-term commitments than
licensing.
