MIB Master of International Business MCQ 2 — Questions and Answers
Question 1: Which theory suggests that countries should specialize in producing goods for which they have a lower opportunity cost compared to other countries?
- Absolute advantage
- Comparative advantage (Correct answer)
- Heckscher-Ohlin theorem
- Leontief paradox
Correct answer: Comparative advantage
Comparative advantage, developed by David Ricardo, holds that trade is beneficial when each country specializes in goods with a lower relative opportunity cost.
Question 2: A US company sells goods to a German buyer with payment due in euros in 90 days. Which risk does the US company primarily face?
- Political risk
- Translation risk
- Transaction exposure (Correct answer)
- Economic exposure
Correct answer: Transaction exposure
Transaction exposure arises from contractual obligations in a foreign currency where exchange-rate movements affect the cash value received.
Question 3: The World Trade Organization's dispute settlement mechanism is BEST described as:
- A voluntary mediation service with no enforcement power
- A binding arbitration system backed by authorized trade retaliation (Correct answer)
- An advisory panel that recommends tariff changes to member governments
- A criminal court for trade fraud cases
Correct answer: A binding arbitration system backed by authorized trade retaliation
The WTO DSU allows winning parties to impose authorized retaliatory tariffs if a losing member does not comply with panel rulings.
Question 4: A multinational firm that adapts its products, marketing, and operations to each local market is pursuing which strategy?
- Global standardization strategy
- Transnational strategy
- Multi-domestic strategy (Correct answer)
- International strategy
Correct answer: Multi-domestic strategy
A multi-domestic strategy maximizes local responsiveness by tailoring offerings to each country's unique preferences and conditions.
Question 5: Which financial instrument allows a corporation to lock in a future exchange rate for a specific date and amount, obligating both parties to complete the transaction?
- Currency option
- Currency swap
- Forward contract (Correct answer)
- Currency futures
Correct answer: Forward contract
A forward contract is a customized, over-the-counter agreement that obligates both counterparties to exchange currencies at a predetermined rate on a set date.
Question 6: Which entry mode gives a firm the highest degree of control over its foreign operations but typically requires the greatest resource commitment?
- Licensing
- Exporting
- Wholly owned subsidiary (Correct answer)
- Joint venture
Correct answer: Wholly owned subsidiary
A wholly owned subsidiary provides full managerial control and profit retention but demands significant capital investment and risk assumption.
Question 7: Hofstede's 'Power Distance' dimension measures:
- The extent to which less powerful members of society accept unequal power distribution (Correct answer)
- The degree to which individuals prefer working alone versus in groups
- A society's tolerance for ambiguity and uncertainty
- The balance between masculine and feminine values in a culture
Correct answer: The extent to which less powerful members of society accept unequal power distribution
Power Distance reflects how much inequality in power and authority is accepted and expected by subordinates within a society.
MIB Master of International Business MCQ 2
Which theory suggests that countries should specialize in producing goods for which they have a lower opportunity cost compared to other countries?