MIB Master of International Business 2 — Questions and Answers
Question 1: Which theory explains why countries trade based on their relative efficiency differences rather than absolute cost advantages?
- Heckscher-Ohlin Theory
- Comparative Advantage Theory (Correct answer)
- Factor Endowment Theory
- Porter's Diamond Model
Correct answer: Comparative Advantage Theory
Comparative Advantage Theory, developed by David Ricardo, states that countries should specialize in goods they produce relatively more efficiently, even if another country is absolutely better at producing everything.
Question 2: A U.S. company licenses its technology to a Brazilian firm in exchange for royalty payments. This market entry mode is called:
- Joint venture
- Franchising
- Licensing (Correct answer)
- Greenfield investment
Correct answer: Licensing
Licensing allows a foreign firm to use intellectual property (patents, trademarks, technology) in exchange for royalties, with minimal capital investment by the licensor.
Question 3: Under the PESTEL framework, changes in a host country's corporate tax rates fall under which category?
- Social
- Technological
- Political (Correct answer)
- Economic
Correct answer: Political
Tax policy is set by government legislation, placing it under the Political category of PESTEL analysis.
Question 4: Which international financial reporting standard is most widely adopted outside the United States?
- GAAP
- IFRS (Correct answer)
- SOX
- FASB
Correct answer: IFRS
International Financial Reporting Standards (IFRS) are used in over 140 countries and is the dominant accounting standard outside the U.S., which primarily uses GAAP.
Question 5: When a multinational firm adapts its products significantly for each local market, it is pursuing a:
- Global standardization strategy
- Transnational strategy
- Multidomestic strategy (Correct answer)
- International strategy
Correct answer: Multidomestic strategy
A multidomestic strategy involves customizing products and marketing to meet local preferences in each country, prioritizing local responsiveness over global efficiency.
Question 6: The World Trade Organization's dispute settlement mechanism primarily resolves conflicts through:
- Military arbitration
- Binding panel rulings and appeals (Correct answer)
- Currency sanctions
- Unilateral trade embargoes
Correct answer: Binding panel rulings and appeals
The WTO's Dispute Settlement Body issues binding rulings through expert panels and an Appellate Body, making it the cornerstone of rules-based international trade governance.
Question 7: Hofstede's cultural dimension of 'uncertainty avoidance' measures:
- The degree of income inequality tolerated in society
- How much a society relies on tradition over innovation
- A society's tolerance for ambiguity and unknown situations (Correct answer)
- Whether a culture is more competitive or cooperative
Correct answer: A society's tolerance for ambiguity and unknown situations
Uncertainty Avoidance Index (UAI) reflects how comfortable a culture is with ambiguity; high UAI societies create strict rules and structures to minimize unpredictability.
MIB Master of International Business 2
Which theory explains why countries trade based on their relative efficiency differences rather than absolute cost advantages?