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Multinational Business Finance, 12e (Eiteman, et al)
Chapter 1 Globalization and the Multinational Enterprise

1.1 Globalization and Creating Value in the Multinational Enterprise

Multiple Choice

1) Which of the following are critical to a firm trying to reach the top of the "firm value pyramid"? A) An open market place.
B) High quality strategic management.
C) Access to capital.
D) all of the above
Answer: A
Diff: 2
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Conceptual

2) A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value? A) An open market place.
B) High quality strategic management.
C) Access to capital.
D) none of the above
Answer: D
Diff: 2
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Recognition

3) A well-established, large China-based MNE will probably be most adversely affected by which of the following elements of firm value? A) An open marketplace.
B) High-quality strategic management.
C) Access to capital.
D) Access to qualified labor pool.
Answer: A
Diff: 2
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Conceptual

4) A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value? A) An open marketplace.
B) High-quality strategic management.
C) Access to capital.
D) Access to qualified labor pool.
Answer: C
Diff: 2
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Conceptual

True/False

1) Three necessary conditions for a firm to reach the top of the "firm value pyramid" are an open market place, high quality strategic management, and access to capital. Answer: TRUE
Diff: 1
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Conceptual

2) Comparative advantage is one of the underlying principles driving the growth of global business. Answer: TRUE
Diff: 1
Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Recognition

Essay

1) List and explain three strategic motives why firms become multinationals and give an example of each. Answer: The authors provide 5 strategic motives for firms to become multinationals: market seekers, raw materials seekers, production efficiency seekers, knowledge seekers, and political safety seekers. Market seekers are looking for more consumers for their products such as automobiles or steel. Knowledge seekers may be looking for an educated work force similar to the way firms seeking R and D set up shop in university towns. Raw materials seekers may be after commodities such as oil or copper. Production efficiencies may occur in countries like Mexico that have capable workers and lower wages. Political safety seekers are looking for countries that will not expropriate their assets, so they may stay away from countries that in the post have engaged in such activities. Diff: 3

Topic: 1.1 Globalization and Creating Value in the Multinational Enterprise Skill: Conceptual

1.2 The Theory of Comparative Advantage

Multiple Choice

1) The theory that suggests specialization by country can increase worldwide production is ________. A) the theory of comparative advantage
B) the theory of foreign direct investment
C) the international Fisher effect
D) the theory of working capital management
Answer: A
Diff: 2
Topic: 1.2 The Theory of Comparative Advantage
Skill: Recognition

2) Which of the following is NOT a reason governments interfere with comparative advantage? A) Governments attempt to achieve full employment.
B) Governments promote economic development.
C) National self-sufficiency in defense-related industries.
D) All are reasons governments interfere with comparative advantage. Answer: D
Diff: 2
Topic: 1.2 The Theory of...
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