Chapter 1 Introduction: What is International Business?
Each chapter consists of a collection of True/False Questions, Multiple Choice
Questions, and
Short Essay Questions. The Short Essay questions include a brief answer.
Each question is designed to support one of the chapter Learning Objectives. All
questions follow the
sequence of material in each chapter.
The following information is provided after each question: The correct answer, the
page number in the
chapter to which the question refers, the specific Learning Objective in the chapter
to which the question
refers, the question’s level of difficulty, and the specific AACSB learning goal
addressed by the question.
AACSB refers to the Association to Advance Collegiate Schools of Business.
True/False Questi ons
WHAT IS INTERNATIONAL BUSINESS?
1. The most conspicuous aspect of international business is exporting.
(False; p. 4; concept; Learning Objective 1; moderate)
2. International business is primarily carried out by individual companies.
,(True; p. 4; concept; Learning Objective 1; easy; AACSB: Globalization)
3. The globalization of markets refers to the growing independence and self-sufficiency of
countries worldwide.
(False; p. 4; concept; Learning Objective 1; moderate; AACSB: Globalization)
4. International business today is predominantly the domain of large, multinational
companies.
(False; p. 4; concept; Learning Objective 1; moderate)
WHAT ARE THE KEY CONCEPTS IN INTERNATIONAL BUSINESS?
5. Exporting is an entry strategy involving the sale of products or services to customers
located abroad.
(True; p. 5; concept; Learning Objective 2; easy; AACSB: Globalization)
6. A country’s economic assets are also known as factors of production.
(True; p. 5; concept; Learning Objective 2; moderate)
7. The two primary types of international investment are portfolio investment and foreign
direct investment.
(True; p. 5; concept; Learning Objective 2; easy)
8. Over the last few decades, export activity by nations has grown more quickly than has
domestic production.
(True; p. 5; concept; Learning Objective 2; moderate)
,9. In the past, international trade and investment activities were mainly conducted by
companies that sold services.
(False; p. 8; concept; Learning Objective 2; easy)
10. Services are the fastest growing sector in international trade
(True; p. 8; concept; Learning Objective; moderate)
HOW DOES INTERNATIONAL BUSINESS DIFFER FROM DOMESTIC BUSINESS?
11. Most countries have a consistent degree of government intervention in commercial
activities.
(False; p. 12; concept; Learning Objective 3; moderate)
12. Currency risk refers to the risk posed by adverse unexpected fluctuations in exchange
rates.
(True; p. 12; concept; Learning Objective 3; easy)
13. For internationalizing firms, the consequences of poor business management decisions
are usually more costly when they occur abroad than when they occur at home.
(True; p. 12; concept; Learning Objective 3; easy; AACSB: Globalization)
WHO PARTICIPATES IN INTERNATIONAL BUSINESS?
14. MNEs with extensive international operations tend to carry out downstream activities
such as marketing in foreign countries.
(False; p. 13; concept; Learning Objective 4; easy; AACSB: Globalization)
, 15. International business is primarily the domain of large, resourceful firms.
(False; p. 13; concept; Learning Objective 4; easy; AACSB: Globalization)
16. Exporting is the most common foreign market entry strategy of the SME.
(True; p. 14; concept; Learning Objective 4; moderate; AACSB: Globalization)
WHY DO FIRMS PURSUE INTERNATIONALIZATION STRATEGIES?
17. The opportunity to increase sales is typically the major motive for international
expansion.
(True; p. 17; concept; Learning Objective 5; easy; AACSB: Globalization)
18. For manufacturing companies, on a per-unit-of-output basis, high volumes of
production are correlated with lower per-unit cost.
(True; pp. 17-18; concept; Learning Objective 5; difficult)
WHY SHOULD YOU STUDY INTERNATIONAL BUSINESS?
19. Since the 1980s, emerging market countries have experienced substantial market
liberalization and privatization.
(True; p. 18; concept; Learning Objective 6; moderate; AACSB: Globalization)
20. Firms that do not export tend to create jobs more quickly than do exporting firms.
(False; p. 19; concept; Learning Objective 6; moderate)
MULTIPLE-CHOICE QUESTIONS
For each of the following choose the answer that most completely answers the question.
Each chapter consists of a collection of True/False Questions, Multiple Choice
Questions, and
Short Essay Questions. The Short Essay questions include a brief answer.
Each question is designed to support one of the chapter Learning Objectives. All
questions follow the
sequence of material in each chapter.
The following information is provided after each question: The correct answer, the
page number in the
chapter to which the question refers, the specific Learning Objective in the chapter
to which the question
refers, the question’s level of difficulty, and the specific AACSB learning goal
addressed by the question.
AACSB refers to the Association to Advance Collegiate Schools of Business.
True/False Questi ons
WHAT IS INTERNATIONAL BUSINESS?
1. The most conspicuous aspect of international business is exporting.
(False; p. 4; concept; Learning Objective 1; moderate)
2. International business is primarily carried out by individual companies.
,(True; p. 4; concept; Learning Objective 1; easy; AACSB: Globalization)
3. The globalization of markets refers to the growing independence and self-sufficiency of
countries worldwide.
(False; p. 4; concept; Learning Objective 1; moderate; AACSB: Globalization)
4. International business today is predominantly the domain of large, multinational
companies.
(False; p. 4; concept; Learning Objective 1; moderate)
WHAT ARE THE KEY CONCEPTS IN INTERNATIONAL BUSINESS?
5. Exporting is an entry strategy involving the sale of products or services to customers
located abroad.
(True; p. 5; concept; Learning Objective 2; easy; AACSB: Globalization)
6. A country’s economic assets are also known as factors of production.
(True; p. 5; concept; Learning Objective 2; moderate)
7. The two primary types of international investment are portfolio investment and foreign
direct investment.
(True; p. 5; concept; Learning Objective 2; easy)
8. Over the last few decades, export activity by nations has grown more quickly than has
domestic production.
(True; p. 5; concept; Learning Objective 2; moderate)
,9. In the past, international trade and investment activities were mainly conducted by
companies that sold services.
(False; p. 8; concept; Learning Objective 2; easy)
10. Services are the fastest growing sector in international trade
(True; p. 8; concept; Learning Objective; moderate)
HOW DOES INTERNATIONAL BUSINESS DIFFER FROM DOMESTIC BUSINESS?
11. Most countries have a consistent degree of government intervention in commercial
activities.
(False; p. 12; concept; Learning Objective 3; moderate)
12. Currency risk refers to the risk posed by adverse unexpected fluctuations in exchange
rates.
(True; p. 12; concept; Learning Objective 3; easy)
13. For internationalizing firms, the consequences of poor business management decisions
are usually more costly when they occur abroad than when they occur at home.
(True; p. 12; concept; Learning Objective 3; easy; AACSB: Globalization)
WHO PARTICIPATES IN INTERNATIONAL BUSINESS?
14. MNEs with extensive international operations tend to carry out downstream activities
such as marketing in foreign countries.
(False; p. 13; concept; Learning Objective 4; easy; AACSB: Globalization)
, 15. International business is primarily the domain of large, resourceful firms.
(False; p. 13; concept; Learning Objective 4; easy; AACSB: Globalization)
16. Exporting is the most common foreign market entry strategy of the SME.
(True; p. 14; concept; Learning Objective 4; moderate; AACSB: Globalization)
WHY DO FIRMS PURSUE INTERNATIONALIZATION STRATEGIES?
17. The opportunity to increase sales is typically the major motive for international
expansion.
(True; p. 17; concept; Learning Objective 5; easy; AACSB: Globalization)
18. For manufacturing companies, on a per-unit-of-output basis, high volumes of
production are correlated with lower per-unit cost.
(True; pp. 17-18; concept; Learning Objective 5; difficult)
WHY SHOULD YOU STUDY INTERNATIONAL BUSINESS?
19. Since the 1980s, emerging market countries have experienced substantial market
liberalization and privatization.
(True; p. 18; concept; Learning Objective 6; moderate; AACSB: Globalization)
20. Firms that do not export tend to create jobs more quickly than do exporting firms.
(False; p. 19; concept; Learning Objective 6; moderate)
MULTIPLE-CHOICE QUESTIONS
For each of the following choose the answer that most completely answers the question.
