Chapter 1

Question 1

Globalization

Answer 1

refers to the shift toward a more integrated and interdependent world economy.

Question 2

Globalization of Markets

Answer 2

refers to the merging of historically distinct and separate national markets into one huge global marketplace.

Question 3

Globalization of Production

Answer 3

refers to sourcing goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labour, energy, land, and capital).

Question 4

Why do companies participate in globalization of production?

Answer 4

By doing this, companies hope to lower their overall cost structure and/or improve quality or functionality of their product offering, thereby allowing them to compete more effectively.

Question 5

WTO

Answer 5

Like the GATTT before it, the WTO is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member-states.

Question 6

The Emergence of Global Institutions

Answer 6

As markets globalize and an increasing proportion of business activity transcends national borders, institutions need to help manage, regulate, and police the global marketplace and promote the establishment of multinational treaties to govern the global business system.

Question 7

International Monetary Fund and World Bank

Answer 7

• Both created in 1944
• Created by 44 nations that met at Bretton Woods, New Hampshire.
• Task of IMF: maintain order in the international monetary system
• Task of World Bank: promote economic development.

Question 8

United Nations

Answer 8

• Established in 1945 by 51 countries committed to preserving peace through international cooperation and collective security.
• Today, nearly every nation in the world belongs to the UN; membership now totals 193 countries and 2 non-member observer states: the Holy Sea and the State of Palestine.

Question 9

FDI

Answer 9

Foreign direct investment occurs when a firm invests resources in business activities outside its home country.

Question 10

The Role of Technological Change

Answer 10

• Microprocessors & Telecommunications
• The Internet
• Transportation Technology
• The Globalization of Production
• The Globalization or Markets

Question 11

Multinational Enterprise (MNE)

Answer 11

any business that has productive activities in 2 or more countries. Since 1960s, there have been 2 notable trends in the demographics of the multinational enterprise:

(1) the rise of non-U.S. multinationals (particularly Japanese).

(2) the growth of mini-multinationals

Question 12

Antiglobalization Protests

Answer 12

Demonstrators were protesting against a wide range of issues:

job losses, downward pressure on the wage rates of unskilled workers, lack of access to markets due to tariffs imposed by developed economies, environmental degradation, and cultural imperialism of global media and multinational enterprises.

Question 13

Globalization and National Sovereignty

Answer 13

Another critic is that today’s increasingly interdependent global economy shifts economic power away from national governments and toward supranational organizations such as the WTO, the European Union, and the UN.

Question 14

Moore’s Law

Answer 14

the power of microprocessor technology doubles and its costs of production fall by half every 18 months.