practice exam 2 Flashcards
The national defense argument for trade restrictions is based on the country’s level of development and foreign direct investment. (true/false)
false;The level of development is not important with regard to trade restrictions. The national defense argument states that certain industries are vital to security and must be kept operating.
When the U.S. government assumed a controlling interest in General Motors after the financial crisis of 2008–2009, what was its primary goal?
1.to enforce a political ideology
2.to make money
3.to save jobs and support its recovery
4.to gain control of the automotive industry
to save jobs and support its recovery;
“The U.S. government assumed a controlling interest in General Motors after the 2008–09 financial crisis in order to save jobs and support its recovery from the crisis.”
Fair competition is a strong rationale for eliminating trade restrictions. With fair competition, there will be increased efficiency for everyone.(true/false)
false; “Fair competition argues that import duties should be used to bring the imported item up to the cost of the domestic one. It eliminates unfair advantages gained through superior technology, lower taxes, lower raw material costs, or lower labor costs. This barrier eliminates the competition’s comparative advantage.”
What long-term strategy is employed by the UN Security Council in order to reduce kidnappings of businesspeople and humanitarian aid workers?
1.increase intergovernmental cooperation
2.establish a humanitarian ransom fund
3.encourage political instability in order to hasten change
4.restrict international business expansion
1.increase intergovernmental cooperation; “In 2019, the UN Security Council reaffirmed its commitment to reduce the payment of ransoms and thus financial support of terrorists through the adoption of a resolution calling on governments to cooperate to reduce kidnapping incidents through exchange of information, coordinated financial tracing and seizing of ransom assets, and collaborated law enforcement to reduce the instability that leads to kidnapping.”
Trade restrictions exist in most countries for what industry?
manufacturing
technology
agriculture
energy
agriculture; “Agricultural trade restrictions exist in most countries as a result of political willingness to protect domestic farmers, especially small farmers.”
The United States has imposed trade restrictions on many of Iran’s major industries as a political response to Iranian aggression. The purpose of these trade restrictions is to
ensure fair competition.
encourage behavior change.
protect domestic jobs.
retaliate for similar restrictions.
encourage behavior change.; “Some trade restrictions are imposed to inflict economic damage on other nations, as a way of punishing them or otherwise encouraging them to modify their behavior. However, sanctions seldom achieve their goal of forcing change in the targeted country.”
Firms are nationalized when the goal of the government is to spread a socialist-communist ideology. (true/false)
false; “One fundamental motivation for nationalization is the belief that governments can better ensure equal access to and control over basic services we consider public goods, such as education and health care, than private owners could do. In addition, government ownership can protect against corruption, put social goals ahead of profit, and reliably provide vital services like national defense.”
To avoid the risk of cybercrime, the best approach is to stay out of foreign markets. (true/false)
false;Cybercrime is borderless, no one government or legal system can control it.
Kidnap, ransom, and extortion are techniques often used by terrorists against which insurance is available.
true; “There is kidnap, ransom, and extortion (KRE) insurance”
Under Prime Minister Cameron, the British government sold the Royal Mail; shares can now be purchased on the London Stock Exchange. This is an example of
expropriation.
centralization.
nationalization.
privatization.
privatization; “The UK government continues to privatize. It sold the Royal Mail in October 2013 and you can buy shares of Royal Mail on the London Stock Exchange.”
Sanctions are a type of trade restriction that are generally ineffective in forcing change in other countries.
true; “Sanctions seldom achieve their goal of forcing change in the targeted country; they also tend to produce collateral economic damage in the nations applying them, in addition to the harm caused in the sanctioned nation.”
What is the general motivation behind business-related cybercrime?
limit international globalization
cause harm to individuals
economic gain
embarrass or punish a firm or its management
economic gain; “Business-targeted cybercrime can cause harm to an entire organization with a few keystrokes; the goal tends to be economic gain, and any harm to individuals is incidental.”
When the U.S. military contracts out support functions in war zones, it is engaged in nationalization. (true/false)
false; “When any government contracts out government work to the private sector, it is engaged in privatization.”
Information that firms need in order to accurately assess a country’s risks varies according to what two major factors?
1.type of business and time needed to gain a satisfactory return on investment
2.time needed for initial market entry and size of anticipated workforce
3.qualifications of workforce and type of government
4.presence of competitors and presence of terrorist or criminal operations
1.type of business and time needed to gain a satisfactory return on investment ; “The types of information a firm will need to judge country risks vary according to the nature of its business and the length of time required for the investment, loan, or other involvement to yield a satisfactory return.”
One historic function of government has been to create stable and predictable environments, to protect economic activities within its borders.(true/false)
true; “In addition to fostering a stable, predictable context for business, governments, whatever their ideology, have historically functioned to protect the economic activities of their citizens—including farming, mining, manufacturing, and the delivery of services—within their area of control.”
Businesses favor stable governments because fiscal, monetary, and political policies are then predictable.(true/false)
true; “Business prospers most when there is a stable government with policies that are permanent or that change only gradually.”
Businesses are unlikely to profit from any political change or instability.(true/false)
false; “Business does not crave stasis; often businesses can profit from opportunities that accompany change. Besides, stasis is unlikely in our increasingly complex global environment”
An important function of a stable government is to:
1.limit economic competition within its borders.
2.protect citizens and businesses from unfair competition.
3.guarantee regulatory stasis.
4.acquire and nationalize most businesses.
2.protect citizens and businesses from unfair competition; “Governments, whatever their ideology, have historically functioned to protect the economic activities of their citizens. This includes protection from unfair competition.”
Governments own the factors of production not only in communist countries, but in many market-based countries as well.(true/false)
TRUE; “Nearly every country has some government-owned businesses.”
The Japanese government limits its automobile exports to the United States. This is an example of which type of trade barrier?
tariff
variable levy
voluntary export restraints
quotas
voluntary export restraints; “Export quotas imposed by the exporting nation are referred to as voluntary export restraints. These are a different kind of quantitative trade barrier, offered by the exporting country rather than imposed by the importing one.”
What should managers be aware of regarding the relationship between a risk analysis and the time period required for satisfactory return on investment opportunities?
1.Risk analysis is only useful for long-term opportunities in other countries.
2.The longer the time horizon, the more reliable the risk analysis.
3.A brief time horizon for investment return does not require risk analysis.
4.The longer the time horizon, the less reliable the risk analysis.
4.The longer the time horizon, the less reliable the risk analysis.; “Problems often increase over the time of the investment and cannot be resolved. The longer the time horizon, the less reliable the risk analysis can be.”
Trade restraints are generally beneficial to consumers.(true/false)
false; “Trade restraints cost consumers everywhere tens of billions of dollars per year, while they benefit a small number of companies in the protected sectors of the economy.”
The practice of country risk assessment is an exercise in understanding the local environment.(true/false)
true; “The first step in managing risk, including political risk, is learning about the environment. Get to know local market players, including government officials, who may have access to useful information before it becomes public. The manager embedded in the local environment will have an informal information network that may be valuable in providing information about anticipated political risk.”
Businesspeople are seldom targeted for kidnapping and ransom because businesses are viewed as apolitical. (true/false)
false; “Kidnapping for ransom is a weapon used by terrorists and other criminals that targets international managers as well as tourists.”
Country risks are hardly ever political in nature.
false; “Country risks are often political and take the form of coups, wars, and revolutions.”
The UN Convention against Corruption (UNCAC) has been signed by 186 countries plus the EU. What does it do?
1.It only covers businesses operating in the EU or Britain.
2.It leaves recovery of assets up to the individual countries.
3.It covers trading in official influence.
4.It only addresses bribery.
It covers trading in official influence.; “The UNCAC goes beyond bribery to address a broader range of corruption, such as general abuse of power and trading in official influence, as well as the recovery of assets from officials accused or convicted of engaging in corruption.”
Product liability is an area of torts in which the U.S. courts make awards that are smaller than the awards made in other countries. (true/false)
false ; “Other countries restrict award amounts. EU countries have the option to cap damages. In contrast, in the United States, product liability cases are heard by juries that can award plaintiffs actual damages plus punitive damages.”
What legal advantage does the international business community perceive in conducting business in Hong Kong compared to other regions in China?
1.It follows a religious law tradition.
2.It strictly adheres to civil law.
3.It operates according to the common law system.
4.It has a less developed legal system.
3.It operates according to the common law system.; “Hong Kong continues to offer legal advantages largely because Hong Kong has a tradition of law adopted from British colonial days that has been tried and tested and is trusted by international businesses. A World Bank indicator on the rule of law scores Hong Kong as a 92 out of 100. It gives China a 45.”
Why is arbitration often a preferred method of resolving international disputes such as cybersquatting?
1.It is usually quicker and less expensive.
2.It is enforced by the UN’s International Court of Justice.
3.Arbitration guarantees that all parties will be satisfied with the outcome.
4.Certified arbitrators are available in every country.
1.It is usually quicker and less expensive. “International businesspeople often agree by stipulating in their contract that any disputes will be resolved by arbitration rather than by litigation. Arbitration is usually quicker, less expensive, and more private than litigation, and it is usually binding on all parties.”
The accounting standards followed by U.S. companies are guided by
1.the SEC.
2.the AACSB.
3.the Fed.
4.the IASB.
SEC; “U.S. accounting practice is guided by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and follows standards known as generally accepted accounting principles (GAAP).”
Common law systems tend to be more flexible than civil law systems because of the role judges play in determining what is lawful. (true/false)
true; “Although common law systems tend to be more adversarial than civil law systems, they are also more flexible because the judge is charged with interpreting law, tradition, and custom.”
The McDonald’s “golden arches” that appear on its restaurants, food packaging, and advertising is an example of which type of intellectual property?
trade secret
trade name
trademark
copyright
trademark.; “A trademark is a shape, color, design, phrase, abbreviation, or sound that stands for a company or its product and that is reserved for that company’s sole use.”
A cotton grower in India has a contract with a clothing manufacturer in Bangladesh. The relationship between these two companies is governed by
international treaties.
international protocols.
public international law.
private international law.
private international law; “Private international law includes laws governing the transactions between individuals and companies that cross international borders. A contract between businesses in two different countries falls under private international law.”
Which statement is accurate regarding international patent rights?
1.The legal rights of patent holders are universally applied.
2.A patent is viewed narrowly as a property right in most countries.
3.In the U.S., a utility patent lasts for 20 years.
4.In the EU, applicants must file separately for a patent in each member country.
3.In the U.S., a utility patent lasts for 20 years.; “Each country administers and handles patents differently. In the United States, a patent is viewed more narrowly as a property right that “excludes others from making, using, offering for sale, or selling the invention” and is divided into three types: utility, design, and plant. In the U.S., a utility patent is for an innovative, useful invention or process, and it gives the patent holder 20-year protection against use by others.”
Protecting a trade secret is usually less costly and time-consuming for businesses than initiating a patent.(true/false)
true; “Trade secrets are the most common form of IP protection that international businesses pursue. Protecting a trade secret is usually less costly and time-consuming than initiating a patent; all you need to do is show you are making an effort to keep the confidential information secret.”
The U.S. Foreign Corrupt Practices Act was designed to increase accounting transparency and to
drive down consumer prices in the United States.
prohibit bribery of foreign officials.
increase foreign competition for U.S. goods.
punish foreign bribery of U.S. officials.
prohibit bribery of foreign officials.; “Congress passed the Foreign Corrupt Practices Act (FCPA) in response to questionable payments by U.S. companies to foreign officials. Key provisions of the act prohibit bribery of foreign officials and set requirements for transparency of accounting transactions.”
Legal uncertainties do not constrain the growth of international business. (true/false)
true; “Despite legal uncertainties of doing business in other countries, international business activities will continue to increase in the future.”
Whether a country’s legal system is based on the rule of law matters little in international business. (true/false)
false; “International businesspeople need to determine that a country is governed by the rule of law, rather than by the rule of a political dictatorship or a powerful elite. When a country’s legal system is based on the rule of law, foreign investment is encouraged because investors know their interests will be protected.”
Under what legal system does a judge actively question the prosecution, the defense, and witnesses during the proceedings, and then ultimately issue a decision based on codified law?
common law
civil law
religious law
autocratic law
civil law ; “The civil law approach is based on codification. The role of the judge is to apply codified law, and judges actively question all the participants in proceedings in order to issue a decision.”
Tran’s company has just offered him a position in the London office. He will live and work there for the next two years but retain his U.S. citizenship. Tran is surprised to learn that he must still pay U.S. employment taxes. This is an example of:
international contract enforcement.
extraterritorial application of laws.
public international law.
UK/U.S. arbitration.
extraterritorial application of laws.; “A country’s attempt to apply its laws to nonresidents and foreigners, and to activities that take place beyond its borders is referred to as the extraterritorial application of laws.”
For some firms, age distribution is an essential indicator of market size.(true/false)
true; “Marketers must identify the segments of the population more apt to buy their goods. Thus, for some firms, age is a salient determinant of market size.”
A motorcycle manufacturer is assessing two potential markets for international expansion: Pakistan and Vietnam. While both countries have some hallmarks of emerging market economies, management can most accurately compare their economic health by analyzing _________blank by adjusting the exchange rates for the two countries so the currencies have equivalent purchasing power.
the Big Mac index.
purchasing power parity
the underground economy
the GINI index.
purchasing power parity; “Often, in the developing economy, the consumer’s market prices for goods are lower than in the developed markets. The United Nations International Comparison Program (ICP) has developed a method of comparing GNIs based on purchasing power parity. This is a means of adjusting the exchange rates so that the two currencies have equivalent purchasing power.
Given a choice, companies would prefer to invest in countries with a high growth rate and a lower GNI/capita than a nation with a high GNI/capita but a lower growth rate.(true/false)
true; “Frequently, given the choice between investing in a nation with a lower GNI/capita but a high growth rate, and a nation in which the conditions are reversed, management will choose the former. The rate of growth may be more important to marketers because a high growth rate indicates a fast-growing market—which is always desirable.”
“Developing” is the term given to the world’s lowest-income nations, which are technically undeveloped.(true/false)
false; “Both low- and middle-income economies are referred to as developing economies.”
A car manufacturer in South Korea is conducting economic analyses of the United States, a market in which it sells many cars. Its primary purpose is to:
eliminate viable competition in the U.S. market.
assess the impact of factors that will affect the firm’s operations.
gain a better understanding of the U.S. political process.
find strategies to lower its unit labor costs.
assess the impact of factors that will affect the firm’s operations.; “The purpose of economic analyses is to assess the overall outlook for the economy and the impact of economic changes on the firm.
