MIB Master of International Business MCQ 3 — Questions and Answers
Question 1: Under the Heckscher-Ohlin model, a labor-abundant country will have a comparative advantage in:
- Capital-intensive goods
- Technology-intensive services
- Labor-intensive goods (Correct answer)
- Natural resource-intensive goods
Correct answer: Labor-intensive goods
The H-O model predicts countries export goods that intensively use their relatively abundant production factor, so labor-abundant countries export labor-intensive products.
Question 2: A tariff-rate quota (TRQ) combines which two trade policy instruments?
- A subsidy and an embargo
- A tariff and a quota (Correct answer)
- A voluntary export restraint and a countervailing duty
- An anti-dumping duty and a safeguard measure
Correct answer: A tariff and a quota
A TRQ allows a set volume of imports at a lower (in-quota) tariff rate, with additional imports subject to a higher (out-of-quota) tariff.
Question 3: When a parent company restates its foreign subsidiaries' financial results into the home-country currency at year-end, this creates:
- Transaction exposure
- Operating exposure
- Translation exposure (Correct answer)
- Sovereign risk
Correct answer: Translation exposure
Translation (accounting) exposure occurs when consolidating foreign-currency financial statements into the parent's reporting currency.
Question 4: The Uppsala internationalization model proposes that firms expand internationally through:
- Simultaneous entry into all major global markets to capture first-mover advantage
- Gradual, incremental commitment starting with psychically close markets (Correct answer)
- Acquisition of competitors in the most profitable markets first
- A single 'big bang' foreign direct investment decision guided by cost-benefit analysis
Correct answer: Gradual, incremental commitment starting with psychically close markets
The Uppsala model describes a sequential learning process where firms first enter culturally and geographically close markets, then gradually increase commitment as knowledge grows.
Question 5: Which of the following BEST describes 'transfer pricing' in a multinational context?
- The exchange rate used to convert dividends paid to foreign shareholders
- Prices set for goods and services transacted between related entities within a corporate group (Correct answer)
- Fees charged by host governments to transfer profits out of the country
- The premium paid when acquiring a foreign company above its book value
Correct answer: Prices set for goods and services transacted between related entities within a corporate group
Transfer pricing refers to the internal prices multinational firms charge their subsidiaries for goods, services, or intellectual property, which can affect tax liabilities across jurisdictions.
Question 6: A 'greenfield investment' in international business refers to:
- Purchasing an existing foreign company outright
- Forming a joint venture with a local partner
- Building new production facilities from scratch in a foreign country (Correct answer)
- Licensing technology to a foreign manufacturer
Correct answer: Building new production facilities from scratch in a foreign country
A greenfield investment involves establishing a brand-new operation in a foreign market rather than acquiring or partnering with an existing firm.
Question 7: Which institution provides long-term loans and grants to developing countries primarily to reduce poverty and support development projects?
- International Monetary Fund
- Bank for International Settlements
- World Bank Group (Correct answer)
- Asian Infrastructure Investment Bank
Correct answer: World Bank Group
The World Bank Group (particularly IBRD and IDA) funds infrastructure, education, and health projects in developing economies with a poverty-reduction mandate.
MIB Master of International Business MCQ 3
Under the Heckscher-Ohlin model, a labor-abundant country will have a comparative advantage in: