Exam Flashcards
Which of the following is the underlying principle of socialism?
A. The welfare of individuals far outweighs the welfare of society.
B. Collective welfare of people outweighs the welfare of the individual.
C. Capital and wealth should be vested in the hands of few and used primarily as a means of profit.
D. The state should protect itself from individual and group interests.
B. Collective welfare of people outweighs the welfare of the individual.
Which of the following is a first-mover advantage?
A. International firms may gain experience in that country’s business practices.
B. An international firm can reap the rewards of growth in a new market without incurring the risks.
C. A firm may have the opportunity to be the first to introduce generic brands to a market.
D. A firm can gauge how well their product will do in the market without taking the risk of investing there.
A. International firms may gain experience in that country’s business practices.
Which of the following is true regarding Porter’s diamond theory?
A. It predicts that countries should be importing products from those industries where all four components of the diamond are favorable.
B. Porter’s theory has been proven to be an accurate predictor of the importing and exporting patterns of countries.
C. It predicts that countries should be exporting products from those industries where all four components of the diamond are those areas where the components are not favorable.
D. Porter’s theory has not been subjected to detailed empirical testing, so we do not know if it is correct.
D. Porter’s theory has not been subjected to detailed empirical testing, so we do not know if it is correct.
Which of the following is a legal means by which the state can expropriate the profits from innovation?
A. demands for money to grant a license
B. expropriation
C. enforcing property rights
D. excessive taxation
D. excessive taxation
A country’s economic system and property rights regime are reasonably good predictors of economic prospects.
True
False
True
China has the infrastructure and the skilled labor that has enabled it to become a world manufacturing leader. This relates to which of Porter’s attributes of a nation?
A. firm strategy, structure, and rivalry
B. related and supporting industries
C. demand conditions
D. factor endowments
D. factor endowments
Which of the following statements pertaining to innovation and entrepreneurship is true?
A. They are the engines of growth.
B. They require strong legal systems.
C. They require state ownership of means of production.
D. They require a mixed economy.
A. They are the engines of growth.
In 2008 and 2009, the GATT became the forum though which major nations attempted to launch a coordinated policy response to the global financial crisis, which started in America.
Yes
No
No
The research and development division of a company has recently designed a new coffee vending machine that is likely to sell very well in the market. It is compact, user-friendly, and provides unprecedented efficiency in terms of cost per cup. Consequently, the company fears that its competitors would soon mimic the design of its product. To protect its product, the company is now seeking a ____.
A. copyright.
B. patent.
C. trademark.
D. certification.
B. patent.
Which of the following legal systems is largely practiced in the Middle East?
A. religious
B. socialist
C. civil
D. common
A. religious
Although many countries have stringent intellectual property regulations on their books, the enforcement of these regulations has often been lax. This has been the case even among many of the 185 countries that are now members of the ________, all of which have signed international treaties designed to protect intellectual property.
A. World Intellectual Property Organization
B. General Agreement on Tariffs and Trade
C. Business Software Alliance
D. Trade-Related Aspects of Intellectual Property Rights (TRIPS)
A. World Intellectual Property Organization
Religion-based totalitarian states are called ________.
A. theocratic
B. secular
C. socialistic
D. atheistic
A. theocratic
What will happen, according to Paul Samuelson’s critique, if a rich country enters into a free trade agreement with a poor country?
A. Both the countries will incur losses due to the exchanges between them.
B. The productivity of the poor country will decline rapidly.
C. The poor country will rapidly improve its productivity.
D. Both the countries will garner benefits from the exchanges between them
C. The poor country will rapidly improve its productivity.
From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.
Yes
No
Yes
Which of the following factors hinders globalization of consumer goods market?
A. National differences in tastes and preferences
B. Higher production costs in developed nations
C. Homogenization of material culture
D. Increasing outsourcing of goods and services
A. National differences in tastes and preferences
Apple’s iPhone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first-mover advantage.
Yes
No
Yes
Walmart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits from
A. first-mover advantage.
B. constant marginal returns.
C. economies of scale.
D. absolute advantage of production.
C. economies of scale.
It may be more costly to do business in relatively primitive or undeveloped economies because of
A. international trade restrictions.
B. the lack of governmental support.
C. difficulty obtaining workers.
D. the lack of infrastructure and supporting businesses.
D. the lack of infrastructure and supporting businesses.
The theories of international trade claim that promoting free trade is generally in the best interests of
A. a country, although it may not always be in the best interest of an individual firm.
B. all multinational corporations.
C. an individual firm, although it may not always be in the best interest of a country.
D. the World Trade Organization.
A. a country, although it may not always be in the best interest of an individual firm.
In Russia, in the chaotic period following the collapse of communism, an outdated legal system, coupled with a weak police force and judicial system, allowed the Russian Mafia to demand “protection money” from business owners. Any business owner who rebelled had to face violent retribution. This violation of property rights exemplifies
A. private action.
B. copyright violation.
C. infrastructural failure.
D. public liability.
A. private action.
The three major types of current political systems are _____
A. totalitarianism, socialism, and democracy
B. socialism, democracy, and monarchy
C. totalitarianism, liberalism, and fascism
D. democracy, republicanism, and oligarchy
A. totalitarianism, socialism, and democracy
Countries with ________ economies in which property rights are protected tend to achieve greater economic growth rates than other economies where property rights are poorly protected.
A. mixed
B. market
C. free market
D. command
C. free market
The likelihood that a trading partner will opportunistically break a contract or expropriate property rights is called a(n)
A. economic risk.
B. legal risk.
C. cultural risk.
D. political risk.
B. legal risk.
What is comparative advantage defined?
A. You produce the things you are especially good at, and buy from others, the goods you are less efficient in producing.
B. To produce and consume all goods without trade.
C. How the world actually works.
D. Globalization, growing economic linkages among countries.
A. You produce the things you are especially good at, and buy from others, the goods you are less efficient in producing.
The World Bank has focused on policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties.
Yes
No
No
Many countries in Africa score below 0.5 on the Human Development Index. This means that these countries have
A. few political freedoms.
B. poor quality of life.
C. low purchasing power parity.
D. no gross domestic product.
B. poor quality of life.
________ government seeks to control not only all economic and political matters but also the attitudes, values, and beliefs of the citizenry.
A. democratic
B. socialistic
C. mixed
D. totalitarian
D. totalitarian
A democratic government seeks to control not only all economic and political matters but also the attitudes, values, and beliefs of the citizenry.
True
False
False
Google launched Google Plus to gain a foothold in the social media market. However, given that there are numerous social networking platforms and Facebook is already a leader in social media, Google Plus found it challenging to generate brand loyalty and establish itself in the market. This was because of
A. incumbent disadvantage.
B. disintermediation disadvantage.
C. late-mover disadvantage.
D. horizontal integration disadvantage.
C. late-mover disadvantage.
A multinational enterprise (MNE) is a firm that ____.
A. exports its products to multiple countries
B. has production units in more than two countries
C. does most of its business on the Internet
D. lists its securities on a public exchange
B. has production units in more than two countries
Ricardo’s theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.
Yes
No
No
Which form of government is characterized by private property rights and limited government?
A. autocratic
B. democratic
C. socialist
D. totalitarian
B. democratic
Which of the following has enabled globalization of markets?
A. Differentiation amongst national markets
B. Falling barriers to cross border trade
C. Reduced homogeneity of material culture across the world
D. Increased government ownership of factors of production
B. Falling barriers to cross border trade
A market with a large number of consumers with low living standards will have a relatively large market when measured in economic terms.
True
False
False
According to Adam Smith, the trade between countries should happen _____.
A. Naturally according to the market forces
B. Under government regulation
C. Using factors that are available
D. Only when a country has an absolute advantage
D. Only when a country has an absolute advantage
Mercantilists believed that a country could increase the amount of wealth it had by
A. Promoting exports and discouraging imports
B. Discouraging exports and promoting imports
C. Controlling imports and exports
D. Increasing both imports and exports
A. Promoting exports and discouraging imports
The ______ 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 member states.
A. International Development Association
B. World Bank
C. International Court of justice
D. World Trade Organization
D. World Trade Organization
If, for example, the textile industry in a nation is characterized by vigorous domestic rivalry, which of the following observations of this nation’s international competency is most likely to be true?
A. The nation will have access to such basic factors of the textile industry as natural resources.
B. The nation’s textile firms will have a competitive advantage in international trade.
C. The domestic customers of the textile firms will be less demanding.
D. The nation’s textile industry will lack the advanced factors that are necessary to be internationally competent.
B. The nation’s textile firms will have a competitive advantage in international trade.
The G20 was originally established to ____.
A. preserve peace through international cooperation and collective security
B. maintain order in the international monetary system
C. formulate a coordinated policy response to financial crises in developing nations
D. manage, regulate, and police the global marketplace
C. formulate a coordinated policy response to financial crises in developing nations
Which of the following is true about the International Monetary Fund?
A. It is primarily responsible for policing the world trading system.
B. It is seen as the lender of last resort to nation-states whose economies are in turmoil.
C. It is responsible for establishing multinational treaties to govern the global business system
D. It was established to formulate a coordinated policy response to financial crises in developing nations.
B. It is seen as the lender of last resort to nation-states whose economies are in turmoil.
The most global markets currently are markets for consumer products.
Yes
No
No
Globalization of markets results in markets becoming ____.
A. less interdependent
B. less diverse
C. more protected
D. less competitive
B. less diverse
To account for differences in the cost of living, one can adjust GNI per capita by ________, which allows for a more direct comparison of living standards in different countries.
A. gross domestic product
B. Human Development Index
C. living standards rate
D. purchasing power
D. purchasing power
Which of the following is a consequence of globalization?
A. Decreasing interdependence between national economies
B. Increasing outsourcing of services
C. Differentiation of material culture
D. Increase in barriers to cross-border trade
B. Increasing outsourcing of services
When communism collapsed, many of the communist countries lacked the legal structure required to protect property rights because all the property was earlier held by the state.
True
False
True
The long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth of consumers in that market, and the likely future wealth of consumers.
True
False
True
The overall attractiveness of a country as a potential market or investment site for an international business depends on
A. if the country has a high gross national income.
B. balancing the benefits, costs, and risks associated with doing business in that country.
C. whether the company can be the first mover in the market.
D. whether the government can be greased.
B. balancing the benefits, costs, and risks associated with doing business in that country.
The _____ was established on October 24, 1945, by 51 countries committed to preserving peace through international cooperation and collective security.
A. World Trade Organization
B. United Nations
C. G20
D. World Bank
B. United Nations
Economic risks are independent of political risk.
True
False
False
Trade unions are part of a country’s legal system.
True
False
False
What was the first economic theory of international trade to be developed?
A. The theory of mercantilism
B. The theory of comparative advantage
C. The theory of absolute advantage
D. The Heckscher-Ohlin theory
A. The theory of mercantilism
Which of the following statements is true about an international business?
A. An international business needs to invest directly in operations in other countries.
B. An international business needs to have homogenous practices across countries.
C. An international business can be managed in the same way that a domestic business is managed.
D. An international business must find ways to work within the limits imposed by government intervention.
D. An international business must find ways to work within the limits imposed by government intervention.
Which of the following is NOT an impediment that makes it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe?
A. Reduced tariffs on imports of manufactured goods
B. Government regulations
C. Issues associated with economic and political risk
D. Barriers to foreign direct investment
A. Reduced tariffs on imports of manufactured goods
Several of the fastest-growing Asian economies adopted more ________ governments during the past three decades, including South Korea and Taiwan.
A. totalitarian
B. democratic
C. dictatorial
D. socialist
B. democratic
The shift toward a more integrated and interdependent world economy is referred to as globalization.
Yes
No
Yes
The immediate cause of country risk is a legal or political factor.
True
False
True
Which of the following terms refers to the existence of a legal system based on clear rules and fair enforcement?
A. conciliation
B. arbitration
C. culture of law
D. rule of law
D. rule of law
XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.
Yes
No
No
The General Agreement on Tariffs and Trade (GATT) was responsible for ____.
A. protecting government owned enterprises
B. policing the global marketplace
C. limiting nuclear testing
D. promoting environment friendly technology
B. policing the global marketplace
Which of the following is characteristic of an effective legal system?
A. a stable and rigid framework of rules and norms across nations
B. systematically enforced laws and regulations
C. political involvement in business transactions
D. universal emphasis on religious law over common and civil law
B. systematically enforced laws and regulations
Totalitarianism’s fundamental tenet is that capital and wealth should be vested in the state and used primarily as a means of production rather than for profit.
True
False
False
The local grocery in a small southern city is the only option for the residents, so it has a monopoly on the grocery business there. When the population of the city grows and demand for groceries increases, what is the grocery store most likely to do?
A. Restrict output to drive prices down.
B. Increase output to drive prices down.
C. Restrict output and let prices rise.
D. Increase output and let prices rise.
C. Restrict output and let prices rise.
Sony was a pioneer in the portable music market segment. The Sony Walkman was an innovative product that created a new category altogether and made Sony a technological leader. This gave the company an edge over other consumer electronics brands that introduced portable music players for a very long time. In this example, Sony had the
A. vertical integration advantage.
B. purchasing power parity advantage.
C. free-rider advantage.
D. first-mover advantage.
D. first-mover advantage.
Common and Civil Law (Scenario)Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane’s legal experts must determine which system would be the most beneficial to Zane in the long-term.
Which of the following questions would be more important for Zane legal experts to consider before recommending Country A or Country B?
A. Have other corporations based in these two countries been profitable?
B. What is the prevalence of industrial crime in these two countries?
C. How would a contractual dispute with a local vendor be resolved?
D. Would local environmental organizations target Zane for its manufacturing practices?
C. How would a contractual dispute with a local vendor be resolved?
The finance minister of a country considers several large, state-owned iron manufacturing units to be inefficient and a source of corruption. To generate resources for public expenditure and promote economic growth, the government decides to auction an entire iron manufacturing plant to sell it to a strategic investor. This process exemplifies
A. nationalization.
B. industrialization.
C. liberalization.
D. privatization.
D. privatization.
What are the four factor endowments?
A. National resources, labor, physical capital and human capital
B. Types of technology
C. Material inputs used up in the process of production
D. International differences in climate
A. National resources, labor, physical capital and human capital
A company does not need a large size to facilitate, and benefit from, the globalization of markets.
Yes
No
Yes
What is the main reason that managing an international business differs from managing a domestic business?
A. Because international managers are more experienced
B. Because countries differ in their cultures and systems
C. Because countries want to do business with their neighbors
D. Because countries want to keep their transactions simple
B. Because countries differ in their cultures and systems
By identifying and investing early in a potential future economic star, international firms can ________ and gain experience in that country’s business practices.
A. build brand loyalty
B. learn which government officials need to receive kickbacks
C. begin to stockpile that country’s currency
D. build infrastructure
A. build brand loyalty
Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.
Yes
No
No
The commercial aircraft industry can support only a limited number of firms, largely because the existence of established firms would make it difficult to be competitive. This is a basic tenet of
A. mercantilism.
B. the theory of absolute advantage.
C. Heckscher-Ohlin theory.
D. new trade theory.
D. new trade theory.
In a market economy, the government may intervene to address the inequalities that market economies sometimes produce.
True
False
True
Which of the following is a risk associated with globalization?
A. Restrictions on competition
B. Global financial contagion
C. Excessive market regulation
D. Differentiation of markets
B. Global financial contagion
In 2008, the U.S. government took an 80 percent stake in AIG to stop that financial institution from collapsing, the theory being that if AIG did collapse, it would have very serious consequences for the entire financial system. What type of economy is this an example of?
A. command
B. mixed
C. capitalistic
D. market
B. mixed
Islamic law is based on the ________.
A. Bible
B. Bhagavad Gita
C. Tanakh
D. Qur’an
D. Qur’an
Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by globalizing their markets. This involves ____.
A. regulating markets
B. privatizing state-owned enterprises
C. decreasing competition
D. reducing foreign investment
B. privatizing state-owned enterprises
Which of the following best captures Krugman’s view of the lesson of the New Trade Theory for trade policy, according to his article “Is Free Trade Passé”?
A. Countries are almost certain to lose from trade unless their governments intervene.
B. Countries may lose from trade, and are likely to lose if their governments pursue a policy of free trade.
C. Countries may gain or lose from trade, and it does not much matter what the government does.
D. Countries will most likely gain from trade, and in any case they are not likely to do better if their governments intervene.
D. Countries will most likely gain from trade, and in any case they are not likely to do better if their governments intervene.
Which of the following is one of the implications of the New Trade Theory?
A. Countries as a whole must gain from trade.
B. A country can only hurt itself by using government policies to promote exports.
C. Consumers gain from the increased variety of goods that trade makes available.
D. A country may export a good or import it, but not both.
C. Consumers gain from the increased variety of goods that trade makes available.
Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country?
A. product life-cycle theory
B. Ricardo’s theory
C. theory of comparative advantage
D. new trade theory
D. new trade theory
Which of the following factors is likely to make a country a more attractive location for international business?
A. totalitarian regimes
B. planned economies
C. government ownership of production methods
D. market-based economic policies
D. market-based economic policies
