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C211 OA 2026 PRACTICE QUESTION SET TWO
◉ Which of the following is true of globalization according to the "pendulum view" perspective? Answer: Globalization is a not a one- directional phenomenon. ◉ The _____ of globalization suggests that globalization is neither recent nor one-directional. Answer: pendulum view ◉ Which of the following is true of semiglobalization? Answer: It is a type of globalization that lies between total isolation and total globalization. ◉ Globalization can be viewed as: Answer: A new force sweeping through the world in recent times. A long-run historical evolution since the dawn of human history. A pendulum that swings from one extreme to another from time to time. ◉ Name the three views of globalization. Answer: A recent force, a long-running evolution, and a pendulum ◉ The _____ theory viewed international trade as a zero-sum game. Answer: mercantilism
◉ The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports. Answer: protectionism ◉ Which of the following is a modern trade theory? Answer: National competitive advantage ◉ The _____ theory is based on the assumption that the wealth of the world is fixed. Answer: mercantilism ◉ Import quotas are a type of _____. Answer: tariff barrier ◉ According to the theory of absolute advantage, under free trade, Answer: Each nation gains by specializing in economic activities in which a nation has absolute advantage. ◉ Which of the following is NOT a nontariff trade barrier (NTB)? Answer: Cultural distance ◉ Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the
◉ MNEs' possession and leveraging of certain valuable, rare, hard- to-imitate, and organizationally embedded (VRIO) assets overseas in the context of FDI refer to _____. Answer: ownership ◉ Firms prefer FDI to licensing because FDI_____. Answer: provides the firm with direct ownership to its foreign assets ◉ Which of the following political perspectives maintains the view that FDI has both pros and cons and can only be approved when its benefits outweigh costs? Answer: Pragmatic nationalism ◉ Which of the following is a benefit of FDI to home countries? Answer: Learning from operations ◉ Which of the following foreign exchange transactions provide protection to traders and investors from being exposed to fluctuations of the spot rate? Answer: Forward transactions ◉ _____ is defined as the conversion of one currency into another at Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future. Answer: Currency swap ◉ Foreign exchange rates are influenced by: Answer: Interest rates and money supply. Relative price differences and purchasing power parity.
Supply and demand of the currencies. ◉ A savvy global business manger must understand the following concepts to be considered literate about foreign exchange: Answer: Understand the factors that influence exchange rates Understand the ways to hedge currency risks Understand the foreign exchange market ◉ Which of the following are the primary types of foreign exchange transactions made by financial companies? Answer: Swaps, spot transactions, forward transactions ◉ A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through: Answer: strategic hedging ◉ Why do managers, at some of the largest global corporations, fail to engage in currency hedging? Answer: They believe that the protection against fluctuations in exchange rates is not worth the potentially high cost of currency hedging. ◉ Risk analysis of any country must include an analysis of the country's: Answer: currency risks
Knowledge spillovers among closely located firms. ◉ Which of the following is a first-mover advantage? Answer: Avoid clashing with dominant firms in their home market. ◉ Which of type of entry mode is a wholly owned subsidiary? Answer: Equity mode ◉ What are the possible benefits of being a late mover? Answer: Opportunity to free ride on first-mover investments First mover's difficulty to adapt to market changes Resolution of technological and market uncertainty ◉ Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be: Answer: a contractual agreement. ◉ Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be: Answer: a wholly owned subsidiary.
◉ The price leader's _____ is defined as sufficient resources possessed to deter and combat defection. Answer: capacity to punish ◉ _____ is defined as the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. Answer: Resource similarity ◉ Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it? Answer: Attack, counterattack ◉ When firms indirectly coordinate actions by signaling their intentions, often in an attempt to reduce output and maintain pricing above competitive levels, they are engaging in: Answer: tacit collusion. ◉ Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors? Answer: Developing new markets where there is less competition ◉ How do firms create value when engaging rivals? Answer: Launch products in multiple markets. Hold a dominant position in key markets.
◉ Name the three views of globalization. Answer: A recent force, a long-running evolution, and a pendulum ◉ The _____ theory viewed international trade as a zero-sum game. Answer: mercantilism ◉ The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports. Answer: protectionism ◉ Which of the following is a modern trade theory? Answer: National competitive advantage ◉ The _____ theory is based on the assumption that the wealth of the world is fixed. Answer: mercantilism ◉ Import quotas are a type of _____. Answer: tariff barrier ◉ According to the theory of absolute advantage, under free trade, Answer: Each nation gains by specializing in economic activities in which a nation has absolute advantage. ◉ Which of the following is NOT a nontariff trade barrier (NTB)? Answer: Cultural distance
◉ Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the following is true? Answer: France has a comparative advantage in wine. ◉ Which of the following theories does NOT lead to the conclusion that unrestricted free trade is in the best interests of all countries? Answer: Strategic trade theory ◉ Free trade is defined as: Answer: The idea that market forces should determine how much to trade with little or no government intervention. ◉ According to the theory of absolute advantage, under free trade, Answer: each nation gains by specializing in economic activities in which a nation has absolute advantage. ◉ Which of the following is NOT a nontariff trade barrier (NTB)? Answer: Cultural distance ◉ Protectionism is similar to mercantilism as they both advocated _____. Answer: government involvement in international trade
◉ _____ is defined as the conversion of one currency into another at Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future. Answer: Currency swap ◉ Foreign exchange rates are influenced by: Answer: Interest rates and money supply. Relative price differences and purchasing power parity. Supply and demand of the currencies. ◉ A savvy global business manger must understand the following concepts to be considered literate about foreign exchange: Answer: Understand the factors that influence exchange rates Understand the ways to hedge currency risks Understand the foreign exchange market ◉ Which of the following are the primary types of foreign exchange transactions made by financial companies? Answer: Swaps, spot transactions, forward transactions ◉ A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through: Answer: strategic hedging
◉ Why do managers, at some of the largest global corporations, fail to engage in currency hedging? Answer: They believe that the protection against fluctuations in exchange rates is not worth the potentially high cost of currency hedging. ◉ Risk analysis of any country must include an analysis of the country's: Answer: currency risks ◉ With regard to foreign market entry, the resource-based view argues that foreign firms need to Answer: deploy overwhelming resources and capabilities to offset their liability of foreignness. ◉ Which of the following is a first-mover advantage? Answer: Avoidance of clash with a dominant firm at home ◉ Which of the following is an equity mode of entry? Answer: Wholly owned subsidiaries ◉ Which of the following entry modes is a type of strategic alliance? Answer: Licensing ◉ Which of the following is a disadvantage of licensing and franchising? Answer: Little control over marketing
◉ Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be: Answer: a contractual agreement. ◉ Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be: Answer: a wholly owned subsidiary. ◉ The price leader's _____ is defined as sufficient resources possessed to deter and combat defection. Answer: capacity to punish ◉ _____ is defined as the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. Answer: Resource similarity ◉ Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it? Answer: Attack, counterattack ◉ When firms indirectly coordinate actions by signaling their intentions, often in an attempt to reduce output and maintain pricing above competitive levels, they are engaging in: Answer: tacit collusion.
◉ Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors? Answer: Developing new markets where there is less competition ◉ How do firms create value when engaging rivals? Answer: Launch products in multiple markets. Hold a dominant position in key markets. Secure patents on key products. ◉ On a graph, consumer surplus is represented by the area a. below the price and above the supply curve. b. below the demand curve and above price. c. between the demand and supply curves. d. below the demand curve and to the right of equilibrium price. Answer: below the demand curve and above price. ◉ A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes a. decreases, and the consumer surplus in the market for red wine decreases.
d. both Janine and Henry experience an increase in consumer surplus. Answer: both Janine and Henry experience an increase in consumer surplus. ◉ Import quotas and tariffs produce some common results. Which of the following is not one of those common results? a. Producer surplus in the domestic country always increases. b. The domestic country always experiences a deadweight loss. c. Equal revenue is always raised for the domestic government. d. Total surplus in the domestic country always falls. Answer: Equal revenue is always raised for the domestic government. ◉ If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be a. better off regardless of how Colombia responds. b. better off if Colombia removes the subsidies, and will be no worse off if it doesn't. c. worse off regardless of how Colombia responds. d. worse off if Colombia doesn't remove the subsidies in response to the threat. Answer: worse off if Colombia doesn't remove the subsidies in response to the threat. ◉ What is the fundamental basis for trade among nations?
a. Shortages or surpluses in nations that do not trade b. Absolute advantage c. Comparative advantage d. Misguided economic policies Answer: Comparative advantage ◉ A tax on an imported good is called a a. tariff. b. quota. c. supply tax. d. trade tax. Answer: tariff. ◉ In a simple circular-flow diagram, total income and total expenditure are a. never equal because total income always exceeds total expenditure. b. equal only when the government purchases no goods or services. c. always equal because every transaction has a buyer and a seller. d. seldom equal because of the ongoing changes in an economy's unemployment rate. Answer: always equal because every transaction has a buyer and a seller. ◉ GDP is defined as the
