Question

a.

_____ is the least risky and _____ is the most risky when expanding overseas.

	A.	exporting, franchising
	B.	direct investment, exporting
	C.	exporting, direct investment
	D.	strategic alliance, exporting

b.

Barriers between people from different countries can include:

	A.	language differences
	B.	personal space differences
	C.	adherence to time/schedules
	D.	all of the above

c.

A licensing agreement allows you to:

	A.	enter a market quickly
	B.	hold minimal financial risk
	C.	incur minimal overall risk
	D.	all of the above

d.

There is a relationship between opportunity cost and ____.

	A.	comparative advantage
	B.	direct investment
	C.	trade deficit
	D.	trade surplus

e.

In a trade deficit situation, ____ money leaves the country.

	A.	not enough
	B.	too much
	C.	just the right amount of
	D.	none of the above

Answer 1

a) The correct answer is C. exporting, direct investment. Exporting is the least risky because it doesn't require the company to operate in a foreign country or adhere to those countries' business regulations. Direct investment is the riskiest when expanding overseas because the company is required to set up offices, plants, and factories in a foreign country. This significantly increases both financial risks as well as the operational risk of running the business.

b) The correct answer is D. all of the above. Barriers between people from different countries can include both linguistic as well as cultural differences. Hence such barriers may stem from either language differences or due to lack of mutual respect towards each others' social norms as well as work culture.

c) The correct answer is D. all of the above. A licensing agreement gives a company many advantages in a foreign country. It gives them quick and easy access to the markets of that country. It lowers the capital requirements as well as eases the regulatory hurdles of setting up the business in that country. Hence both financial, as well as overall risk, are also minimized.

d) The correct answer is A. comparative advantage. Comparative advantage is defined as the economic term in which a country produces goods and services at a lower opportunity cost in comparison with its competing countries. Hence, there is a relationship between opportunity cost and comparative advantage.

e) The correct answer is B. too much. A trade deficit is defined as a situation where a country's import hugely exceeds its exports. Therefore, the net situation is that too much money is leaving the country.