The most commonly accepted goal of the MNC is: [removed] a. to maximize revenues [removed] b. to maximize shareholder wealth [removed] c. to maximize profitability of the firm [removed] d. both a and b 2. Agency costs are normally larger for MNCs than for purely domestic firms. Which of the following is not a reason for this larger agency cost? [removed] a. Monitoring managers of distant subsidiaries in foreign countries is more difficult. [removed] b. Managers from different cultures may not follow uniform goals. [removed] c. U.S. managers tend to downplay the short-term effects of decisions. [removed] d. Sheer size of the larger MNCs can create larger agency problems. 3. Several constraints confront the MNC in its attempt to maximize shareholder wealth. Which of the following is probably not a constraint? [removed] a. competitive [removed] b. ethical [removed] c. regulatory [removed] d. environmental 4. Part of the growth of multinational business over time is due to the realization that specialization by countries can increase production efficiency, making trade essential when a country focuses on the products it produces best. This is an example of which theory of international business? [removed] a. product cycle theory [removed] b. competitive advantage theory [removed] c. imperfect markets theory [removed] d. comparative advantage theory 5. According to the ___________, firms become first established in the home market as a result of some perceived advantage they would have over existing competitors, such as a need by the market for at least one more supplier of the product. Eventually, firms will penetrate foreign markets to satisfy foreign demand. [removed] a. product cycle theory [removed] b. imperfect markets theory [removed] c. comparative advantage theory [removed] d. none of the above 6. Which method of international business obligates a firm to provide a specialized sales or service strategy, support assistance, and possibly an initial investment in the entity in exchange for periodic fees? [removed] a. joint venture [removed] b. new foreign subsidiary [removed] c. licensing [removed] d. franchising 7. Multinational firms face exposure to many different types of international risk. Which of the following is not a type of exposure mentioned in the text? [removed] a. diversifiable risk [removed] b. political risk [removed] c. foreign economies [removed] d. exchange rate movements 8. A firms expects to receive $20,000 from domestic operations and 20,000 British pounds (£) from a business in England. If the pound’s value is $1.25, the expected total dollar cash flows are: [removed] a. $40,000 [removed] b. $36,000 [removed] c. $45,000 [removed] d. $20,000 9. Which of the following statements is not true regarding the euro? [removed] a. In 1987, several European countries conformed to the euro as their currency for business transactions between these countries. [removed] b. The euro was phased in as a currency for other transactions during 2001. [removed] c. The euro completely replaced the currencies of the participating countries by 2002. [removed] d. The creation of the euro allowed firms (including European subsidiaries of U.S.-based MNCs) to engage in international transactions with the use of one currency and eliminated transactions costs resulting from exchanging currencies. 10. A decentralized management style is more likely to result in higher agency costs because the subsidiary managers may make decisions that do not focus on maximizing the value of the entire MNC. [removed] a. True [removed] b. False 11. Using international trade as a method of conducting international business is a relatively bold approach that can be used by firms to penetrate markets. [removed] a. True [removed] b. False 12. The Single European Act of 1987 removed several cross-border barriers among European countries. It also exposed firms to additional competition. [removed] a. True [removed] b. False 13. Under NAFTA, the …
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