QUESTION: 1

Which of the following is the most significant reason that domestic governments and international organizations seek to eliminate cartels?

The increased sales price reduces the amount of corporate tax revenues payable to the government.
True competition keeps prices as low as possible, thus increasing efficiency in the marketplace.
Small businesses cannot survive or grow without government protection.
The economic stability of developing countries depends on a global free market.

Answer(s): B

Explanation:

A cartel is an organization of sellers (e.g., the oil cartel OPEC) who undertake joint action to maximize members' profits by controlling the supply, and therefore the price, of their product. Under the laws of many nations, such collusive conduct is illegal when engaged in by firms subject to those laws. The reason is that, as a result of the monopolistic and anticompetitive practices of cartels, supply is lower, prices are high, competition is restrained, and the relevant industry is less efficient. Accordingly, governmental and international organizations seek to protect consumers and the health of the domestic and global economy through anti-cartel efforts.

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QUESTION: 2

When a multinational firm decides to sell its products abroad, one of the risks the firm faces is that the government of the foreign market charges the firm with dumping. Dumping occurs when

The same product sells at different prices in different countries.
A firm charges less than the cost to make the product so as to enter or win a market.
Lower quality versions of the product are sold abroad so as to be affordable.
Transfer prices are set artificially high so as to minimize tax payments.

Answer(s): B

Explanation:

Dumping is an unfair trade practice that violates international agreements. It occurs when a firmcharges a price (1) lower than that in its home market or (2) less than the cost to make
the product. Dumping may be done to penetrate a market or as a result of export subsidies.

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QUESTION: 3

A global firm

Has achieved economies of scale in the firm's domestic market.
Plans, operates, and coordinates business globally.
Relies on indirect export.
Tends to rely more on one product market.

Answer(s): B

Explanation:

According to Kotler, "Global firms plan, operate, and coordinate their activities on a worldwide basis." Thus, a global firm secures cost or product differentiation advantages not available to domestic firms.

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QUESTION: 4

A firm expands into international markets to

Be in foreign markets.
Eliminate foreign competition
Pursue new, higher-profit opportunities.
Preclude piracy of the firm's products.

Answer(s): C

Explanation:

A firm may decide to go abroad for many reasons, for example, to respond to a competitive challenge in its home country by another global firm, to pursue opportunities yielding greater profits, to achieve economies of scale, to diversify, or to follow customers who need international service.

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Certified Internal Auditor - Part 4, Business Management Skills IIA-CIA-PART4 Exam

QUESTION: 1

Explanation:

QUESTION: 2

Explanation:

QUESTION: 3

Explanation:

QUESTION: 4

Explanation:

Certified Internal Auditor - Part 4, Business Management Skills
IIA-CIA-PART4 Exam