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International Financial Environment Chapter 2

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International Financial Environment Chapter 2

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Questions and Answers

What is the primary goal of a multinational corporation (MNC)?

To increase market share

To expand globally

To minimize costs and expenses

To maximize shareholder wealth (correct)

What occurs when managers prioritize their own interests over those of shareholders?

An agency problem (correct)

A corporate conflict

A management issue

A shareholder dispute

Why do multinational corporations (MNCs) tend to experience greater agency problems?

Due to their global presence

Due to a lack of communication

Because of the distance between headquarters and subsidiaries (correct)

Because of cultural differences

What can help ensure that subsidiary managers focus on serving the overall MNC?

Proper incentives and communication from the parent Signup and view all the answers

How many key theories justify international business?

Three Signup and view all the answers

What does the theory of comparative advantage suggest?

Countries should specialize in their comparative advantage Signup and view all the answers

What is the primary assumption of the imperfect markets theory?

Factors of production are immobile Signup and view all the answers

What is the primary idea behind the product cycle theory?

Firms expand globally after establishing themselves in their home countries Signup and view all the answers

Why do firms commonly expand their product specialization in foreign countries?

Because of the product cycle theory Signup and view all the answers

What is the consequence of agency problems in multinational corporations?

Decreased shareholder wealth Signup and view all the answers