Chapter 2

Question 1

Collectivism

Answer 1

refers to a political system that stresses the primacy of collective goals over individual goals.

Question 2

Individualism

Answer 2

• the opposite of collectivism
• in a political sense, individualism refers to a philosophy that an individual should have freedom in his or her economic and political pursuits.

Question 3

2 Central Tenets of Individualism

Answer 3

1. an emphasis on the importance of guaranteeing individual freedom and self-expression
2. the welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (such as government)

Question 4

Totalitarianism

Answer 4

form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.

Question 5

Communist totalitarianism

Answer 5

version of collectivism advocating that socialism can only be achieved through a totalitarian dictatorship.

Question 6

Theocratic Totalitarianism

Answer 6

Political system in which political power is monopolized by a party, group, or individual that governs according to religious principles.

Question 7

Tribal Totalitarianism

Answer 7

Political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.

Question 8

Right-Wing Totalitarianism

Answer 8

Political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.

Question 9

Market Economy

Answer 9

Economic system wherein the interaction of supply and demand determines the quantity in which goods and services are produced.

Question 10

Command Economy

Answer 10

Economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.

Question 11

Mixed Economy

Answer 11

Economic system wherein certain sectors are left to private ownership and free market mechanisms, while others have significant government ownership and government planning.

Question 12

GNI

Answer 12

• Gross National Income
• Total income of all citizens of a country, including the income from factors of production used abroad.
• Since 2001, the World Bank has used this measure of economic activity instead of the previously used GNP.

Question 13

Purchasing Power Parity (PPP)

Answer 13

Adjustment in gross domestic product per capita to reflect differences in the cost of living.

Question 14

Human Development Index (HDI)

Answer 14

Attempt by UN to assess the impact of a number of factors on the quality of human life in a country.

Question 15

Deregulation

Answer 15

involves removing restrictions to the free play of markets, to establishment of private enterprises, and to the manner in which private enterprises operate.

Question 16

Privatization

Answer 16

transfers the ownership state property into the hands of private individuals, frequently by the sale of state assets through an auction.

Question 17

Laws Protecting Property Rights

Answer 17

• Laws protecting private property rights and providing mechanisms for contract enforcement are required for a well-functioning market economy.
• Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities, including organized crime, that expropriate the profits generated the efforts of private-sector entrepreneurs.

Question 18

Implications for Business

Answer 18

The implications for international business of the material discussed in this chapter fall into 2 broad categories:

1. The political, economic, and legal environmental of a country clearly influences the attractiveness of that country as a market and/or investment site.
2. The political, economic, and legal systems of a country can raise important ethical issues that have implications for the practice of international business.