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Unformatted text preview: Chapter 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1 The commonly accepted goal of the MNC is to: A) maximize short-term earnings. B) maximize shareholder wealth. C) minimize risk. D) A and C. E) maximize international sales. 2 For the MNC, agency costs are typically: A) non-existent. B) larger than agency costs of a small purely domestic firm. C) smaller than agency costs of a small purely domestic firm. D) the same as agency costs of a small purely domestic firm. 3 Which of the following could reduce agency problems for an MNC? A) stock options as managerial compensation. B) hostile takeover threat. C) investor monitoring. D) all of the above are forms of corporate control that could reduce agency problems for an MNC. 4 The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____. A) decrease; appreciate B) increase; appreciate C) decrease; depreciate D) increase; depreciate 5 Which of the following theories identifies specialization as a reason for international business? A) theory of comparative advantage. B) imperfect markets theory. C) product cycle theory. D) none of the above 6 Which of the following theories identifies the non-transferability of resources as a reason for international business? A) theory of comparative advantage. B) imperfect markets theory. C) product cycle theory. D) none of the above 7 Which of the following theories suggests that firms seek to penetrate new markets over time? A) theory of comparative advantage. B) imperfect markets theory. C) product cycle theory. D) none of the above 8 Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries? A) assembly line production. B) specialized professional services. C) nuclear missile planning. D) planning for more sophisticated computer technology. 9 Due to the risks involved in international business, firms should: A) only consider international business in major countries. B) maintain international business to no more than 20% of total business. C) maintain international business to no more than 35% of total business. D) none of the above 10 The agency costs of an MNC are likely to be lower if it: A) scatters its subsidiaries across many foreign countries. B) increases its volume of international business. C) uses a centralized management style. D) A and B. 11 An MNC may be more exposed to agency problems if most of its shares are held by: A) a few mutual funds B) a widely dispersed set of individual investors C) a few pension funds D) all of the above would prevent agency problems 12 The Sarbanes-Oxley Act improves corporate governance of MNCs because it: A) makes executives more accountable for verifying financial statements B) eliminates stock options as a form of compensation C) ties executive compensation to firm performance D) places a limit on the amount of funds that managers can spend...
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- Spring '12