IBUS 401 Exam 1 Terms Answered
Correctly!!!
What is the main goal of an MNC? CORRECT ANSWERS to maximize shareholder
wealth
what is the theory of comparative advantage? CORRECT ANSWERS countries should
use its comparative advantage to specialize in production and rely on other countries to
meet their needs (i.e products)
what does the imperfect market theory say? CORRECT ANSWERS factors of
production are not able to move, which encourages countries to specialize based on the
resources they have
What does the product cycle theory say? CORRECT ANSWERS says that after firms
are established in their home countries, they typically expand their product
specialization in foreign countries (Ex: tv being made in Virginia then being made in
Asia)
Common ways firms conduct (carry out ) international business CORRECT ANSWERS
international trade
licensing
franchising
joint ventures
acquisitions of foreign firms
formation of foreign subsidiaries (company owned or controlled by another company)
valuation model of an MNC CORRECT ANSWERS says the MNC's value is affected
when its expected foreign cash flow increases , the currencies denominating those cash
flows increase, or the MNC's required rate of return decreases or vice versa
what are agency costs for? CORRECT ANSWERS to make sure the managers are
doing what is in the best interest for the stakeholders
why are agency costs larger for MNC's? CORRECT ANSWERS 1. you're monitoring
managers in foreign countries
2. the foreign managers are from different cultures and might not follow uniform goals
3. MNC's are bigger
3 types of balance of payments CORRECT ANSWERS 1. current account
2. capital account
3. financial account
, what is a current account? CORRECT ANSWERS payment of goods or services being
traded back and forth or interest and dividends - when we are buying something and
importing it or selling and exporting it
it is money going in or out NOW
what is a capital account? CORRECT ANSWERS when you are moving financial assets
from one country to another
what is a financial account? CORRECT ANSWERS the long term investment
money that goes in and out of the US that is going to stay somewhere for a long time
this would be like investing in another country to build a factory, office etc
this investment is called a direct foreign investment
Where is the Direct foreign investment if the us is doing business and builds a factory in
Taiwan? CORRECT ANSWERS in Taiwan
Where is the direct foreign investment if Germany comes to Chapin, SC and builds a
Samsung? CORRECT ANSWERS DFI in the US
what is a portfolio investment? CORRECT ANSWERS a long term investment with an
outflow of funds
ex: buying stocks and bonds in another country
means you're buying or selling long term financial assets
what are the factors that have cause international trade to increase significantly?
CORRECT ANSWERS 1. removal of the Berlin wall
2. single European act
3. NAFTA
4. GATT
5. The European Union
The European Union: CORRECT ANSWERS has really increased trade volume
they now have larger, more efficient factories and one currency
what is the impact of outsourcing on trade? CORRECT ANSWERS it has significantly
increased trade. it is when you are doing something in your own country and decide to
have that done outside of your country so the things that used to be built or bought in
the US are now an imported item
main goal of the international monetary funds CORRECT ANSWERS they are the
largest non government organization in the world and they want to increase global trade
How can government restrictions affect international payments among countries?
CORRECT ANSWERS can place tariffs or quotas that completely restrict trade with a
country
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