MIB Master of International Business MCQ 5 — Questions and Answers
Question 1: Which concept describes a situation where a multinational shifts profits from high-tax jurisdictions to low-tax ones through manipulated intra-group transactions?
- Tax harmonization
- Base erosion and profit shifting (BEPS) (Correct answer)
- Thin capitalization
- Double taxation relief
Correct answer: Base erosion and profit shifting (BEPS)
BEPS refers to strategies exploiting gaps and mismatches in tax rules to shift profits to low-tax jurisdictions, reducing the overall tax base of high-tax countries.
Question 2: In the context of global supply chains, 'just-in-time' (JIT) inventory management is primarily associated with which risk?
- Currency fluctuation eroding supplier margins
- Supply disruption vulnerability when there are no buffer stocks (Correct answer)
- Overproduction leading to excess finished goods
- Regulatory risk from customs delays on outbound shipments
Correct answer: Supply disruption vulnerability when there are no buffer stocks
JIT minimizes inventory costs by receiving materials only as needed, but leaves the supply chain highly exposed to any disruption since there are no safety stocks.
Question 3: Which regional trade agreement created the world's largest free trade area by GDP at the time of its signing in 2020?
- Trans-Pacific Partnership (TPP)
- Regional Comprehensive Economic Partnership (RCEP) (Correct answer)
- African Continental Free Trade Area (AfCFTA)
- United States-Mexico-Canada Agreement (USMCA)
Correct answer: Regional Comprehensive Economic Partnership (RCEP)
RCEP, signed in November 2020 and covering 15 Asia-Pacific nations, became the largest free trade agreement by combined GDP and trade volume.
Question 4: Ethnocentrism in international staffing refers to the practice of:
- Hiring only local nationals for all foreign subsidiary positions
- Filling key management roles abroad with home-country nationals (PCNs) (Correct answer)
- Recruiting the best talent globally regardless of nationality
- Rotating managers across multiple countries every two years
Correct answer: Filling key management roles abroad with home-country nationals (PCNs)
An ethnocentric staffing approach places parent-country nationals in key positions at foreign subsidiaries, reflecting a belief that home-country methods are superior.
Question 5: The 'country-of-origin effect' in international marketing refers to:
- Import duties levied based on where a product was manufactured
- Consumers' positive or negative perceptions of products based on their country of manufacture (Correct answer)
- The legal requirement to label all products with their origin country
- A trade remedy applied when imported goods are subsidized by foreign governments
Correct answer: Consumers' positive or negative perceptions of products based on their country of manufacture
The country-of-origin effect describes how a product's perceived quality and desirability are influenced by consumers' stereotypes about its country of production.
Question 6: Which of the following BEST describes a 'sovereign wealth fund' (SWF)?
- A central bank's reserve of foreign currencies used to stabilize the exchange rate
- A state-owned investment fund typically funded by commodity revenues or foreign exchange reserves (Correct answer)
- An IMF emergency lending facility for governments facing balance-of-payments crises
- A multilateral development bank that finances infrastructure in emerging economies
Correct answer: A state-owned investment fund typically funded by commodity revenues or foreign exchange reserves
SWFs are government-owned pools of capital, often built from oil revenues or trade surpluses, invested in global assets to generate long-term returns for the state.
Question 7: A multinational company faces 'political risk' in a host country. Which of the following is an example of MACRO political risk?
- A host government expropriates only the MNE's specific assets due to a contract dispute
- A change in government leads to broad nationalization of all foreign-owned firms across industries (Correct answer)
- A local partner in a joint venture commits fraud against the MNE
- A regulatory agency fines the MNE for an environmental violation
Correct answer: A change in government leads to broad nationalization of all foreign-owned firms across industries
Macro political risk affects all foreign firms operating in a country (e.g., sweeping nationalization), whereas micro political risk targets specific companies or sectors.
MIB Master of International Business MCQ 5
Which concept describes a situation where a multinational shifts profits from high-tax jurisdictions to low-tax ones through manipulated intra-group transactions?