International Business Quiz

The commonly accepted goal of the MNC is to:

• Maximise short-term earning.

• Maximise shareholder wealth.

• Minimise risk

• Maximise international sales.

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 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.

The least risky method by which firms conduct international business is:

• Franchising.

• The acquisitions of existing operations.

• International Trade.

• The establishment of new subsidiaries.

The agency costs of an MNC are likely to be lower if it:

• Scatters its subsidiaries across many foreign countries.

• Increase its volume of international business

• Uses a centralised management style

• A and B

Assume that Boca Co. wants to expand its business to Japan, and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co?

• Joint venture

• Licensing

• Partial acquisition of existing Japanese firm

• Establishment of Japanese subsidiary

Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Saller Co. has decline since last month. What could’ve caused this decline in value?

• A weaker Mexican economy

• Lower Mexican interest rates

• Depreciation of the Mexican peso

• Appreciation of the Mexican peso

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

• Theory of comparative advantage

• Imperfect markets theory.

• Product cycle theory

• None of the above.