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  3. IIA-CIA-PART4

IIA IIA-CIA-PART4 Exam (page: 4)
IIA Certified Internal Auditor - Part 4, Business Management Skills
Updated on: 12-Feb-2026

Viewing Page 4 of 108
IIA-CIA-PART4 PDF 535 Questions

A country has a comparative advantage in international trade when

  1. Firms in the country have a lower cost of production because of natural resources.
  2. It has an absolute advantage with respect to at least one input to production.
  3. Firms in the country have a lower cost of production because of transportation and other geographic factors.
  4. It produces whatever it can produce most efficiently.

Answer(s): D

Explanation:

A country has a comparative advantage when it can achieve a lower cost of production due to a focus on and a cooperative specialization in a particular product. The greatest advantage from trade is obtained when each nation specializes in producing what it can produce most efficiently. If nations specialize and then exchange with others, more is produced and consumed than if each nation tries to be self-sufficient. Specialization of labor is beneficial for individuals; the same principle applies to nations.



Michael E Porter developed what is popularly known as the diamond model for determining national advantages in the global business environment. According to this model.

  1. Factor conditions are production advantages that are nature-made or inherited.
  2. Foreign markets exert less influence than home markets on a firm's ability to detect demand trends.
  3. Reliance on related and supporting industries in the home country weakens a firm's international competitiveness.
  4. Cooperation with domestic competitors clearly aids international competitiveness.

Answer(s): B

Explanation:

Home demand conditions determine the inherent demand for goods or services that originate within the home country. Porter believes that home markets exert a much higher influence on a firm's ability to recognize consumer trends than those in a foreign market. Moreover, home demand offsets innovation and product development. Home demand is a function of
(1) the mixture of customer needs and wants,
(2) their scope and growth rate,
(3) the means by which domestic preferences are communicated to international markets. Moreover, a national advantage is achieved when home demand provides more timely and clear trend indicators to domestic firms than to foreign firms.



A U.S firm most likely may decide to enter the Australian market because of

  1. Geography.
  2. The unmet needs of an undeveloped country.
  3. Psychic proximity.
  4. Population.

Answer(s): C

Explanation:

Attractiveness of a foreign market is a function of such factors as geography, income, climate, population, and the product. Another major factor is the unmet needs of a developing nation, for example, China or India. Entry into a market abroad may be based on many factors, for example, psychic proximity. Thus, a first-time venture abroad might be in a market with a related culture, language, or laws.



Firms that sell products worldwide are most likely to have the lowest costs with a marketing mix that is

  1. Adapted to each market.
  2. Standardized for all markets.
  3. A combination of new and adapted products in each market.
  4. A combination of standardized products and adapted promotions.

Answer(s): B

Explanation:

Firms that operate globally must choose a marketing program after considering the need for adaptation to local circumstances. The possibilities lie on a continuum from a purely standardized marketing mix to a purely adapted marketing mix. The former chooses to standardize products, promotion, and distribution. The latter adapts the elements of the mix to each local market. Worldwide standardization of all elements should be the lowest cost marketing strategy. However, even well established global brands ordinarily undergo some adaptation to local markets.



A firm sells the same product in different countries and uses the same promotion methods. According to keegan's model of adaptation strategies, this firm has adopted a strategy of

  1. Straight extension.
  2. Product adaptation.
  3. Product invention.
  4. Dual adaptation.

Answer(s): A

Explanation:

Using a straight extension strategy, a higher profit potential exists because virtually no changes are made in the products or its promotion. There is a downside potential if foreign consumers are not familiar with this type of product or do not readily accept it.



Viewing Page 4 of 108



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