Chapters 7, 8, and 9

Question 1

Country Risk

Answer 1

Exposure to potential loss or adverse effects on company operations and profitability caused by development in a country’s political and/or legal environments

Question 2

Political System

Answer 2

A set of formal institutions that constitute a government

Question 3

Legal System

Answer 3

A system for interpreting and enforcing laws

Question 4

Rule of law

Answer 4

A legal system in which rules are clear, publicly disclosed, fairly enforced, and widely respected by individuals, organizations and the government

Question 5

Extraterritoriality

Answer 5

Application of home-country laws to persons or conduct outside national borders

Question 6

Transparency

Answer 6

The degree to which companies regularly reveal substantial information about their financial condition and accounting practices

Question 7

Protectionism

Answer 7

National economic policies designed to restrict free trade and protect domestic industries from foreign competition

Question 8

Tariff

Answer 8

A tax imposed on imported products, effectively increasing the cost of acquisition for the customer

Question 9

Nontariff trade barrier

Answer 9

A government policy, regulation, or procedure that impedes trade through means other than explicit tariffs

Question 10

Customs

Answer 10

Checkpoints at the ports of entry in each country where government officials inspect imported products and levy tariffs

Question 11

Quota

Answer 11

A quantitative restriction placed on imports of a specific product over a specified period of time

Question 12

Export Control

Answer 12

A government measure intended to manage or prevent the export of certain products or trade with certain countries

Question 13

Import license

Answer 13

Government authorization granted to a firm for importing a product

Question 14

Currency control

Answer 14

Restrictions on the outflow of hard currency from a country or on the inflow of foreign currencies

Question 15

Countervailing duty

Answer 15

Tariff imposed on products imported into a country to offset subsidies given to producers or exporters in the exporting country

Question 16

Dumping

Answer 16

Pricing exported products at less than their normal value, generally less than their price in the domestic or third-country markets, or at less than production cost

Question 17

Antidumping duty

Answer 17

A tax imposed on products deemed to be dumped and causing injury to producers of competing products in the importing country

Question 18

Investment incentive

Answer 18

Transfer payment or tax concession made directly to foreign films to entice them to invest in the country

Question 19

Foreign Trade Zone (FTZ)

Answer 19

An area within a country that receives imported goods for assembly or other processing and re-export. For customs purposes the FTZ is treated as if it is outside the country’s borders

Question 20

Maquiladoras

Answer 20

Export-assembly plants in northern Mexico along the U.S. border that produce components and typically finished products destined for the United States on a tariff-free basis

Question 21

Regional Economic Integration

Answer 21

The growing economic interdependence that results when two or more countries within a geographic region form an alliance aimed at reducing barriers to trade and investment

Question 22

Free Trade Agreement

Answer 22

A formal arrangement between two or more countries to reduce or eliminate tariffs, quotas, and barriers to trade in products and services

Question 23

Free trade area

Answer 23

A stage of regional integration in which member countries agree to eliminate tariffs and other barriers to trade in products and services within the bloc

Question 24

Customs union

Answer 24

A stage of regional integration in which the member countries agree to adopt common tariff and nontariff barriers on imports from nonmember countries

Question 25

Common market

Answer 25

A stage of regional integration in which trade barriers are reduced or removed, common external barriers are established, and products, services, and factors of production are allowed to move freely among the member countries

Question 26

Economic Union

Answer 26

A stage of regional integration in which member countries enjoy all the advantages of early stages, but also strive to have common fiscal and monetary policies