Chapter 1
1. Agency Problems of MNCs
a. Explain the agency problem of MNCs
b. Why might agency costs be larger for an MNC than for a purely domestic firm?
2. Comparative Advantage
a. Explain how the theory of comparative advantage relates to the need for international business
b. Explain how the product cycle theory relates to the growth of an MNC
3. Imperfect Markets
a. Explain how the existence of imperfect market has let to the establishment of subsidiaries in foreign market
b. If perfect markets existed, would wages, prices, and interest rates among countries be more similar or less similar than under conditions of imperfect markets? Why?
4. International Opportunities
a. Do you think the acquisition of a foreign firm or licensing will result in greater growth for an MNC? Which alternative is likely to have more risk?
b. Describe a scenario in which the size of corporation is not affected by access to international opportunities
c. Explain why MNCs such as Coca-Cola and PepsiCo., still have numerous opportunities for international expansion
5. International Opportunities Due to the Internet
a. What factors cause some firms to become more internationalized than others?
b. Offer your opinion on why the internet may result in more international business
6. Impact of Exchange Rate Movements
a. Plak Co. of Chicago has several European subsidiaries that remit earnings to it each year. Explain how appreciation of the Euro (the currency used in many European countries) would affect Plak’s valuation
7. Benefits and Risks of International Business
a. As an overall review of tis chapter, identify possible reasons for growth in international business. Then, list the various disadvantages that may discourage international business.
Chapter 2
1. Balance of Payments
a. Of what is the current account generally composed?
b. Of what is the capital account generally composed?
2. Inflation Effect on Trade
a. How would a relatively high home inflation rate affect the home country’s current account, other things being equal?
b. Is a negative current account harmful to a country? Discuss
3. Government Restrictions
a. How can government restrictions affect international payments among countries?
4. IMF
a. What are some of the major objectives of the IMF?
b. How is the IMF involved in international trade?
5. Exchange Rate Effect on Trade Balance
a. Would the U.S. Balance of trade deficit be larger or smaller if the dollar depreciates against all currencies, versus depreciating against some currencies but appreciating against others? Explain.
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