Week Two Midterm Exam

QUESTION 1

According to the VRIO framework, non-value-adding resources and capabilities will lead to _____ for a firm.

a.

a competitive parity

b.

a sustained competitive advantage

c.

a temporary competitive advantage

d.

a competitive disadvantage

3 points

QUESTION 2

An original brand manufacturer includes research and development in its value chain activities.

True

False

3 points

QUESTION 3

Which of the following strategies would suit a firm activity that is both firm-specific and industry-specific?

a.

Offshore the activity to a foreign supplier

b.

Set up a subsidiary in a foreign location to perform the activity

c.

Outsource the activity to a domestic firm

d.

Keep the activity in-house

3 points

QUESTION 4

The perceptions of product quality, durability, and reliability are an example of _______ resources and capabilities.

a.

reputational

b.

physical

c.

human

d.

technological

3 points

QUESTION 5

Commoditization is the point at which an activity becomes proprietary or firm-specific.

True

False

3 points

QUESTION 6

Firms that design, manufacture, and market distinguished products are called _____.

a.

original design manufacturers

b.

original equipment manufacturers

c.

original brand manufacturers

d.

business process outsourcing firms

3 points

QUESTION 7

The rarity of a firm’s resources and capabilities is studied under the VRIO framework.

True

False

3 points

QUESTION 8

_____ includes setting up subsidiaries abroad so that the work done is in-house but the location is foreign.

a.

Onshoring

b.

Captive sourcing

c.

Insourcing

d.

Offshoring

3 points

QUESTION 9

New York has more Fortune Global 500 company headquarters than any other city.

True

False

3 points

QUESTION 10

All the countries of the BRIC belong to the top tier of the global economic pyramid.

True

False

3 points

QUESTION 11

The _____ is measured as the sum of value added by resident firms, households, and governments operating in an economy.

a.

gross national product

b.

gross national income

c.

gross domestic product

d.

national reserve

3 points

QUESTION 12

Which of the following is true of economies in the base of the global economic pyramid?

a.

They are composed of developed economies.

b.

They are composed of people from North America, Western Europe, and Japan.

c.

They are largely ignored by MNEs.

d.

They attract the largest FDI from MNEs.

3 points

QUESTION 13

Overall, the focus on firm performance around the globe defines the field of global business more than anything else.

True

False

3 points

QUESTION 14

Without adjusting for PPP, emerging economies contribute about 30% of the global GDP. Adjusting for PPP, they now contribute approximately 50% of the global GDP. The reason there is a huge difference between the two measures is because

a.

the cost of living in emerging economies tends to be lower than that in developed economies.

b.

the purchasing power parity is much higher in emerging countries.

c.

the population in emerging economies is much higher than that in developed economies.

d.

the deficit spending in emerging economies is much larger than that in developed economies.

3 points

QUESTION 15

The liability of foreignness is the inherent disadvantage faced by _____.

a.

domestic firms against other domestic firms that have engaged in global business

b.

foreign firms in host nations due to their non-native status

c.

domestic firms from foreign firms setting up in their country

d.

foreign firms from their home country governments

3 points

QUESTION 16

Which of the following groups is primarily composed of emerging economies?

a.

The Triad

b.

BRIC

c.

Group of Eight (G8)

d.

NAFTA

3 points

QUESTION 17

Which of the following is true of the Group of 20 (G-20)?

a.

It only has 19 member countries.

b.

It doesn’t represent any European nation.

c.

It meets annually to discuss environmental issues.

d.

It includes many regional blocs.

3 points

QUESTION 18

A vertical FDI refers to a type of FDI in which _____.

a.

a firm invests in a portfolio of foreign securities but without active management of those foreign assets

b.

a firm produces the same products or services in a host nation as it does at home

c.

a firm duplicates its home country-based activities at the same value chain stage in a host country

d.

a firm moves upstream or downstream at different value chain stages in a host country

3 points

QUESTION 19

Intrafirm trade enables MNEs to better coordinate cross-border activities.

True

False

3 points

QUESTION 20

Repatriated earnings from profits of MNEs benefit the host country financially.

True

False

3 points

QUESTION 21

_____ refers to international transactions between two subsidiaries in two countries controlled by the same MNE.

a.

Agglomeration

b.

Monopolization

c.

Oligopoly

d.

Intrafirm trade

3 points

QUESTION 22

A(n) _____ refers to an industry dominated by a small number of players.

a.

oligopoly

b.

monopoly

c.

perfect competition

d.

free market

3 points

QUESTION 23

FPI refers to investment in a portfolio of foreign securities that do not entail the active management of foreign assets.

True

False

3 points

QUESTION 24

Knowledge spillover refers to _____.

a.

the risk associated with unauthorized diffusion of firm-specific know-how

b.

a violation of the knowledge and IP rights secured by a copyright

c.

knowledge diffused from one firm to others among closely located firms

d.

the imperfect rules governing international transactions

3 points

QUESTION 25

_____ refers to the clustering of economic activities in certain locations.

a.

Internalization

b.

Expropriation

c.

Agglomeration

d.

Intrafirm trade

3 points

QUESTION 26

The _____ refers to the coercive power of governments.

a.

normative pillar

b.

regulatory pillar

c.

cognitive pillar

d.

informal pillar

3 points

QUESTION 27

Which of the following would be considered an example of intellectual property rights?

a.

Rights associated with ownership of vehicles

b.

Rights associated with ownership of trademarks

c.

Rights associated with ownership of buildings

d.

Rights associated with ownership of business contracts

3 points

QUESTION 28

In private ownership, liquidation of a firm is forced by competition.

True

False

3 points

QUESTION 29

Which of the following is true of the common law system?

a.

It is the oldest legal system in the world.

b.

It has spread to all English-speaking countries and their (former) colonies.

c.

It bases its legal judgment primarily on the dominant religion of the country.

d.

It does not allow interpretations of the law by judges.

3 points

QUESTION 30

The cultural school of thought in economic development suggests that rich countries tend to be endowed with natural resources.

True

False

3 points

QUESTION 31

A fundamental aspect of _____ is that it effectively conducts global business by providing an individual the right to freedom of expression and organization.

a.

communist totalitarianism

b.

right-wing totalitarianism

c.

democracy

d.

theocracy

3 points

QUESTION 32

The main supportive pillars of the informal institutions are _____.

a.

normative and cognitive

b.

regulatory and normative

c.

regulatory, normative, and cognitive

d.

cognitive and regulatory

3 points

QUESTION 33

_____ refers to a legal system based on religious teachings.

a.

Common law

b.

Theocratic law

c.

Civil law

d.

Right-wing totalitarian law

3 points

QUESTION 34

Disabling formal institutes does not affect transaction costs.

True

False

3 points

QUESTION 35

According to sociologist Max Weber, what is the ideological foundation that led to the rise of Western economic development?

a.

The Industrial Revolution

b.

Protestant work ethics

c.

Catholicism

d.

Colonialism

3 points

QUESTION 36

A(n) ____ is a set of guidelines for helping a firm make ethical decisions.

a.

mission statement

b.

code of conduct

c.

operating agreement

d.

certificate of incorporation

3 points

QUESTION 37

Which of the following aspects of a culture would be categorized as an informal institution?

a.

Politics

b.

Ethics

c.

Laws

d.

Economics

3 points

QUESTION 38

Addressing bosses with honorary titles would be an instance of low power distance in a firm.

True

False

3 points

QUESTION 39

Members of short-term orientation societies emphasize perseverance and savings for future betterment.

True

False

3 points

QUESTION 40

A _____ is the highest cultural grouping of people and the broadest level of cultural identity people have.

a.

chiefdom

b.

civilization

c.

tribe

d.

clan

3 points

QUESTION 41

High uncertainty avoidance cultures are characterized by a greater willingness to take risk with change.

True

False

3 points

QUESTION 42

Managers in low uncertainty avoidance countries tend to rely more on rules than experience.

True

False

3 points

QUESTION 43

The theory of comparative advantage _____.

a.

explains patterns of trade based on factor endowments

b.

was the first theory to incorporate dynamic changes in patterns of trade

c.

provides direct policy advice

d.

reduces the wealth of the nation in the short run

3 points

QUESTION 44

The strategic trade theory was mainly proposed for low capital-investment industries.

True

False

3 points

QUESTION 45

_____ are restrictions on the quantity of imports.

a.

Antidumping duties

b.

Import quotas

c.

VERs

d.

Subsidies

3 points

QUESTION 46

Which of the following can be considered as an economic argument against free trade?

a.

National security

b.

Foreign policy

c.

Consumer protection

d.

Infant industry

3 points

QUESTION 47

Environmental and social responsibility can be used as political arguments to initiate trade intervention against certain countries.

True

False

3 points

QUESTION 48

Which of the following is true of voluntary export restraints?

a.

It is an example of a tariff barrier.

b.

It is a government payment to domestic firms.

c.

It is an export quota levied by a country on the quantity of its exports.

d.

It is an extra tax imposed by a country on its exports.

3 points

QUESTION 49

Economist Adam Smith proposed the theory of comparative advantage.

True

False

3 points

QUESTION 50

Protectionism is similar to mercantilism as they both advocated _____.

a.

dividing the nations of the world into three categories based on its innovation capabilities

b.

developing comparative advantages based on a nation’s locally abundant factors

c.

specializing in economic activities in which a nation can have an absolute advantage

d.

government involvement in international trade

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