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 related to the growth of an MNC.

3.) Imperfect Markets

a.) Explain how the existence of imperfect markets has led to the establishment of subsidiaries in foreign markets.

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 a corporation is not affected by access to international opportunities.

c.) Explain why MNCs such as Coca-Cola and PepsiCo, Inc., still have numerous opportunities for international expansion.