Chapter 4: Lecture

Question 1

List 3 economic issues for International Business.

Answer 1

(1) What is the level of development of a particular economy?
(2) What type of economic system does the country have?
(3) How will doing business there affect our firm?

Question 2

What are the three types of economic systems?

Answer 2

Command, Mixed, Market

Question 3

What is the most common type of economic system?

Answer 3

Mixed

Question 4

Describe a Market economy (ownership, philosophy).

Answer 4

Mostly private ownership; entrepreneurial innovation
Invisible hand, laissez faire
Philosophical anchor: CAPITALISM

Question 5

Describe a Mixed economy (ownership, philosophy)

Answer 5

Gov. and private sector share ownership
Goal: balance economic efficiency, protect against excess of greed and self-interest
Philosophical anchor: SOCIALISM

Question 6

Describe a Command economy (ownership, bias, philosophy).

Answer 6

Mostly government ownership; bias toward large-scale, capital intensive production
Visible hand of the state, central planning, collectivism
Philosophical anchor: COMMUNISM

Question 7

What two dimensions are used to describe economic types?

Answer 7

Ownership of Production and Control of Economic Activity

Question 8

What type of Economic System do international business managers prefer?

Answer 8

High economic freedom, enabling them to make economic decisions.

Question 9

What type of Economic System do citizens prefer?

Answer 9

Trickkkkkk question. Some prefer more economic freedom (which leads to entrepreneurial spirit, which leads to economic growth), but some prefer more control because it often reduces unemployment and provides the security of certainty.

Question 10

What group publishes the Economic Freedom Index?

Answer 10

Heritage Foundation. (Very possible you’ll never need to know this in your life… but after the peculiar questions on the midterm, one can never be too safe…)