7. Which of the following theories identifies specialization as the main reason for international business activity? a product life cycle theory of international trade b. theory of diversification e doctrine of comparative advantage theory of globalization Critics of the multinational corporation would NOT fault its tendency to shift production from one location to another in search of lower costs b. avoid taxes c. cause balance of payments difficulties engage in environmental protection measures Multinational firms would most likely be riskier than purely domestic firms because of the exposures of operating abroad less risky than purely domestic firms because of international diversification less risky than domestic firms if the added risks of operating overseas are more than offset by the ability to operate in nations whose economic cycles are not perfectly in phase invested in developed countries only and avoid developing economies 10. According to the capital asset pricing model only the systematic component of risk affects the required return b. foreign investments whose returns are uncorrelated with the market's retum should have a higher required return than comparable domestic investments total risk of the investment is most relevant for small to medium-sized firms d. diversification is secondary to risk levels of the investment 11. The internationalization process most likely tends to a. proceed in a preprogrammed series of steps b. begin by licensing foreign producers c. inevitably involve foreign production d. begin by exporting 12. According to the efficient market hypothesis, which one of the following is NOT correct? a markets place a premium on the future b. C. d. today's stock price is the best predictor of tomorrow's stock price stock prices reflect all available information today's stock price incorporates the past history of prices