Chapter 1

The commonly accepted goal of the MNC is to:

• A. maximize short-term earnings.

• B. maximize shareholder wealth.

• C. minimize risk.

• A and C.

• maximize international sales.

With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

• shareholder wealth; short-term earnings

• shareholder wealth; shareholder wealth

• short-term earnings; sales volume

• short-term earnings; shareholder wealth

For the MNC, agency costs are typically:

• non-existent.

• larger than agency costs of a small purely domestic firm.

• smaller than agency costs of a small purely domestic firm.

• the same as agency costs of a small purely domestic firm.

Which of the following is not a form of corporate control that could reduce agency problems for an MNC?

• stock options

• hostile takeover threat

• investor monitoring

• all of the above are forms of corporate control that could reduce agency problems for an MNC

A recent study by McKinsey & Co. found that investors assign a higher value to firms that exhibit ____ corporate governance standards and are likely to ____ ethical constraints.

• high; not obey

• high; obey

• low; not obey

• low; obey

Which of the following theories identifies specialization as a reason for international business?

• theory of comparative advantage

• imperfect markets theory

• product cycle theory

• none of the above

Which of the following theories identifies the non-transferability of resources as a reason for international business?

• theory of comparative advantage

• imperfect markets theory

• product cycle theory

• none of the above

Which of the following theories suggests that firms seek to penetrate new markets over time?

• theory of comparative advantage

• imperfect markets theory

• product cycle theory

• none of the above

Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries?

• assembly line production

• specialized professional services

• nuclear missile planning

• planning for more sophisticated computer technology

Due to the risks involved in international business, firms should:

• only consider international business in major countries.

• maintain international business to no more than 20% of total business.

• maintain international business to no more than 35% of total business.

• none of the above