Chapter 4 (Economic Systems And Industry Potential)

Question 1

What re the types of economic systems?

Answer 1

Command economy
Market economy
Mixed economy
Economy in transition

Question 2

What are aspects which influence the macroeconomic environment?

Answer 2

Size and growth rate
Income distribution
Balance of payment
Financial system infrastructure
Labor markets
Natural resources

Question 3

What are aspects which impacts an industry’s competitive environment?

Answer 3

Institutional barriers
Market size
Competition
Knowledge and innovation
Suppliers capabilities

Question 4

What makes a command economic system?

Answer 4

Ownership is state owned
Distribution is done by central planning

Question 5

What makes a mixed economic system?

Answer 5

Ownership is state and privately owned
Distribution happens through market pricing and govt regulations

Question 6

What makes a market economic system?

Answer 6

Ownership is privately owned
Distribution is done through market price

Question 7

What re the types of state owned enterprises?

Answer 7

Government-linked companies
Public sector entreprises
Public sector entreprises
State-enabled
Public-private partnerships

Question 8

What are the goal and means of state owned and private enterprises?

Answer 8

Stated owned, goal societal value, means taxes and fees
Private enterprise, goal profit, means consumer value

Question 9

What are the costs of state-owned enterprises?

Answer 9

Distorts competition
Can lead to inefficiencies
Conflict of interest with its regulatory functions
Leads to political interference in market
May discourage foreign investment

Question 10

What are some benefits of state-owned enterprises

Answer 10

Can stabilize an industry in times of financial crisis
Infrastructure development
Serves public interest not limited to a profit

Question 11

Why do some command economies fail?

Answer 11

Too complex
Misallocation of resources
Poor quality of goods and services
Discourages entrepreneurship
Relatively lower rate of innovation
Slow economic growth
Lower standards of living

Question 12

Why do market economies succeed?

Answer 12

Competition
Higher productivity
Efficient allocation of resources
Encourages entrepreneurship
Encourages innovation
Easier to manage/invisible hand

Question 13

What are some condition to economies in transition?

Answer 13

Privatization/liberalization
Changing regulations
Macroeconomic instability
Cultural inertia
Underdeveloped capital markets
Lack of managerial skills
Weak private sectors

Question 14

What is economic liberalization?

Answer 14

Removal of price control
Liberalization of trade (removal of trade tariffs)
Liberalization of investment
-removal of ownership restrictions
-open to foreign investment
-foreign ownership of business enterprise

Question 15

What is privatization?

Answer 15

Sale of state-owned enterprises
Restructuring of large state-owned enterprise into small and medium size enterprises
Prioritization of selected sectors

Question 16

What are some consequences of changing trade regulations?

Answer 16

Newly formed market institutions
High uncertainty
Weak enforcement mechanism
Protection rents
High intellectual property risks

Question 17

What is cultural inertia?

Answer 17

Residue of communist mindset
Desire to avoid cultural change, or a change in trajectories, or conversely, desire cultural change once movement or change is already occurring
Lack of trust
Lack of understanding of market economic system

Question 18

What is a first mover advantage?

Answer 18

Less competition
Protection rents
Switching cost
Pre-empts future competition
Greater choice

Question 19

What is a late mover advantage?

Answer 19

Avoid pioneering costs
Learns from first movers mistakes

Question 20

What re the categories and characteristics of economic development

Answer 20

Dev countries
- industrialized with large service sectors
- well dev healthcare system
- well developed banking system

Newly industrialized countries
- large manufacturing sector
- high rate of economic growth
- growth education and health care

Developing countries
- agricultural, extraction, and tourism sectors
- underdeveloped infrastructure
- underdeveloped social sectors
- high government debts

Question 21

What are the indexes for the global competitiveness index (countries)?

Answer 21

Economic performance
Govt efficiency
Business efficiency
Infrastructure

Question 22

What are some measures to assess the financial sector?

Answer 22

Financial depth
Financial access
Financial stability
Financial efficiency