Questions Flashcards
Which type of globalization refers to the international movement of goods, capital, and services?
Social
Economic
Anti
Cultural
Economic
Correct! The movement of goods and services internationally through trade and trade agreements is economic globalization. As the world becomes smaller, increased movement of goods across borders occurs along with trade agreements.
The CEO of an international company reminds the executive vice presidents that while the company may do good while performing corporate social responsibilities, the business has one ultimate goal since it is engaged in commercial activities with corporate shareholders.
Which ultimate goal is the CEO emphasizing to the executive vice presidents?
Profitability
Exporting
Cultural exchange
Stakeholder satisfaction
Profitability
Correct! Ultimately, a company is engaged in commerce to achieve a profit. Business profit is gauged in financial and economic terms. However, some level of sustained financial and economic profits is needed for a business to achieve other outcomes that are measured as social or environmental performance.
A CEO seeks to better use the economies of scale and scope of production to increase the international company’s profits.
Which type of globalization driver is the CEO seeking to use?
Cost
Government
Market
Competition
Cost
Correct! Companies seek to put production in low labor-cost countries to lower labor costs and increase the contribution margin. Economies of scale and scope and the exploitation of differences in costs for product development, manufacturing, and sourcing in different parts of the world will assume greater importance as determinants of global strategy.
Which argument is used by critics who wish to discourage movement towards globalization?
It increases consumer prices across the world.
It decreases awareness of the international community.
It increases the wealth of the rich rather than the poor.
It decreases the pace of new product development.
It increases the wealth of the rich rather than the poor.
Correct! Critics make the argument that globalization only serves to assist the rich in becoming richer at the expense of the poor.
Which type of economy is decentralized and allows firms and households to participate in global trade with minimum governmental interference?
Market
Command
Mixed
Traditional
Market
Correct! In a market economy, goods and services are owned by individuals or companies that can buy, sell, or lease them to make a profit with minimum interference by the government.
Which type of legal system is based on a code and focuses on how the law is applied to the facts?
Theocratic
Common
Civil
Religious
Civil
Correct! The civil law system is an inquisitorial system where the judge investigates the facts of the case.
Which law is based on tradition and precedent given that judicial rulings can stand as precedents for future cases?
Common
Theocratic
Civil
Religious
Common
Correct! In common law systems, judges hear arguments from both parties and make a judgment. This judgment stands as precedent for future cases.
Which legal system can vary from community to community and is found in countries without strong formal justice systems?
Customary
Common
Civil
Canon
Customary
Correct! This is generally found at the tribal or local level, is based on longstanding local customs, and is often transmitted orally.
In which legal system does a judge decide the applicable law for the case as a jury determines the facts?
Common
Customary
Canon
Civil
Common
Correct! In common law systems, while a jury may determine the facts, a judge decides which law will be applied to the case.
Which activity of the International Monetary Fund (IMF) impacts policymaking?
Supporting loans to developing countries
Engaging over 10,000 staff in cultural affairs training and development
Offering investment services to countries
Being owned and directed by the governments of the member nations
Being owned and directed by the governments of the member nations
Correct! The IMF is owned and directed by the governments of the member nations.
What is a characteristic of the International Monetary Fund (IMF)?
The IMF loans to all nations and helps increase their resources.
The IMF is a developmental institution and supports developing countries.
The IMF is a cooperative institution and provides more effective currency exchange.
The IMF provides financial assistance to all nations and improves their investment capability.
The IMF is a cooperative institution and provides more effective currency exchange.
Correct! The IMF is cooperative institution and is similar to a credit union for all member nations.
What was the initial purpose of the International Monetary Fund (IMF) in phase one, prior to 1973?
Provided a means for nations to easily exchange currency
Supervised economic policies
Offered loans to member organizations
Regulated currency exchange between nations
Regulated currency exchange between nations
Correct! The initial purpose of the IMF was to regulate currency exchange between nations.
How does the International Monetary Fund (IMF) impact international organizations and governments?
It reduces funding for social programs.
It complicates the process for nations to borrow and loan.
It provides limited financial assistance to the wealthy populations.
It over-represents the global south.
It reduces funding for social programs.
Correct! The conditions put on the IMF loan require the recipient country to have a policy of austerity. This policy usually results in a cut in funding for social programs.
What is a common name for the International Bank for Reconstruction and Development?
Federal Reserve Bank
European Central Bank
World Bank
International Monetary Fund
World Bank
Correct! World Bank is the common name for the International Bank for Reconstruction and Development.
What was the first loan that the World Bank made after the end of World War II?
To Switzerland for being neutral in the war
To Germany to rebuild its military
To France to rebuild its infrastructure
To the U.S. to rebuild Europe’s infrastructure
To France to rebuild its infrastructure.
Correct! The first loan made by the World Bank after World War II was used to rebuild the infrastructure of France.
Which criticism is associated with the World Bank?
The developed countries such as the U.S. and Europe have too much control over its decisions.
It makes loans that are too large and cannot be repaid.
It does not offer large enough loans to developing countries.
The developing countries of Asia and Africa have too much control over its decisions.
The developed countries such as the U.S. and Europe have too much control over its decisions.
Correct! This is one of major criticisms of the World Bank.
Which criticism is made about the World Bank?
It funds too many projects in developed countries.
It does not consider how funding projects will affect the environment.
It makes too many loans to countries with strong governments.
It supports government ownership of property.
It does not consider how funding projects will affect the environment.
Correct! One of the criticisms of the World Bank is it does not consider how funding projects will affect the environment.
Country A exports more goods to Country B than it imports from Country B. Country A receives more monetary gain by using this practice.
Which relationship does Country A have with Country B?
Neo-mercantilism
Protectionism
Mercantilism
Trade surplus
Trade surplus
Correct! Trade surplus is when a country exports more than it imports from another country. For example, China normally exports more manufactured goods to the United States than it imports from the United States. China has a trade surplus.
Country A has been criticized by other countries for giving generous tax credits to its corn farmers, which enables the country’s farmers to sell corn on the international markets for cheaper than all other countries.
Which term is used by other countries to describe this practice?
Mercantilism
Trade surplus
Free trade
Government subsidies
Government subsidies
Correct! The farmers are getting payment in the form of tax credits. This creates an unfair advantage to the farmers of Country A.
Which type of tariff is put in place to specifically ensure that domestic industries are given an advantage?
Export
Revenue
Protective
Ad valorem
Protective
Correct! A protective tariff is put into place to reduce the number of imports of a product that is produced domestically and to increase the cost of the imports to make the domestic product’s price more appealing to consumers.
What is a benefit of implementing a system of free trade?
Reduced import quotas would result in more domestic sales due to scarcity.
Reduced tariffs would result in lower costs of imported raw materials.
Increased export quotas would result in more international sales of domestic goods.
Increased tariffs would result in more revenue generated for the government.
Reduced tariffs would result in lower costs of imported raw materials.
Correct! In a free trade system, tariffs are reduced or eliminated to increase the ease and efficiency with which trade can be accomplished.
How are free trade agreements handled differently than treaties in the United States?
Treaties must be approved by the Senate, whereas a free trade agreement must pass both houses of Congress.
Treaties must be approved by the House of Representatives, while a free trade agreement only needs to be approved by the Senate.
Treaties must be approved by both houses of Congress, whereas a free trade agreement only needs to be approved by the Senate.
Treaties must be approved by the Senate, whereas free trade agreements must be approved by the House of Representatives.
Treaties must be approved by the Senate, whereas a free trade agreement must pass both houses of Congress.
Correct! Since a free trade agreement involves revenue from trade, it must be approved by both houses of Congress, whereas a treaty only needs to be approved by the Senate.
How do antidumping laws protect a domestic market?
They prevent international companies from foreign direct investment.
They restrict domestic companies from selling goods at prices above the price of production.
They prevent foreign companies from selling goods and services at or below cost.
They restrict international companies from selling domestically.
They prevent foreign companies from selling goods and services at or below cost.
Correct! Antidumping laws prevent foreign companies from selling goods at or below production cost to ensure domestic companies can stay competitive.
A small clothing company based in California decided that it needed to have an application (app) and an updated website. Because this is a small company, it did not have the technological expertise to handle this improvement. The company hired a company based in Pakistan to handle its technology needs. Which common practice among companies is this an example of?
Merger
Acquisition
Outsourcing
Dumping
Outsourcing
Correct! Outsourcing is an option that can result in cheaper labor in other regions.
Company A is located outside the home country of Company B. Company B has acquired Company A with the intent of controlling and managing Company A’s assets.
Which practice is being used by Company B?
Partnership
Foreign direct investment
Merger
Portfolio investment
Foreign Direct Investment
Correct! Investments made by international companies with the intention of controlling those assets in a foreign market represents foreign direct investment.
Why does a company engage in foreign direct investment?
The company wants to find a foreign source of financing for its foreign operations.
The company wants to identify another company with which it can partner.
The company wants to find a domestic source of financing for its foreign operations.
The company wants to control organizational assets in another country.
The company wants to control organizational assets in another country.
Correct! Foreign direct investment is when a company acquires a foreign firm or asset with the intent to control and manage it to strengthen its economic and financial market position.
Which strategy is used by governments to limit the foreign direct investment in a country?
Creating foreign ownership restrictions in the country
Creating domestic ownership restrictions in the country
Increasing the value of the country’s currency
Decreasing the value of the country’s currency
Creating foreign ownership restrictions in the country
Correct! Many countries restrict the percentage of ownership by foreign investors.
Which activity is considered a foreign direct investment (FDI) by a multinational corporation?
Setting up manufacturing plants in the host country
Providing guidance for franchises in the home country
Setting up manufacturing plants in the home country
Providing guidance for franchises in the host country
Setting up manufacturing plants in the host country.
Correct! FDI is when a company invests in manufacturing or some other major asset in another (host) country.
What is a reason for companies to engage in foreign direct investments?
To take advantage of tax exemptions offered by the home country
To increase imports to the home country
To take advantage of tax exemptions offered by the host country
To decrease imports to the host country
To take advantage of tax exemptions offered by the host country
Correct! Often countries offer tax exemptions to companies that invest in their economies.
Which country characteristic is most important to foreign direct investors according to a study by the World Bank?
Macroeconomic stability and favorable exchange rate
Political stability and security
Access to land or real estate
Low tax rates
Political stability and security
Correct! A recent World Bank study showed political stability and security to be the most important country characteristic when choosing a country to invest in
What is a benefit of foreign direct investment?
The outflow of capital benefits the local but not global economies
The inflow of capital benefits the local but not global economies
The inflow of capital benefits global and local economies
The outflow of capital benefits global and local economies
The inflow of capital benefits global and local economies
Correct! The inflow of capital to a country helps both the global and the local economies.
What is the result of the existence of multinational businesses?
Political integration among countries
Economic separation of countries
Political separation of countries
Economic integration among countries
Economic integration among countries
Correct! One of the results of the existence of multinational businesses is economic integration among countries. This works to promote economic development and trade between home and host countries of multinational businesses.
What is a potential influence of the existence of multinational corporations (MNCs) on international relations?
Improves relations between countries where the MNC operates
Creates international trade barriers
Eliminates international trade barriers
Worsens relations between countries where the MNC operates
Improves relations between countries where the MNC operates.
Correct! An MNC improves relations between countries since they need to cooperate to trade.
What is an accurate characterization of the relationships between multinational corporations (MNCs) and the host country governments in which they operate?
The relationships are mixed because MNCs cause economic strife in the host country.
The relationships are positive because MNCs provide jobs and capital to the host country.
The relationships are mixed because MNCs can cause, but also solve, problems for the host country.
The relationships are negative because MNCs take resources from the host country.
The relationships are mixed because MNCs can cause, but also solve, problems for the host country.
Correct! The relationships between an MNC and the host country can be both good and bad depending on a number of factors including economic development, resource distribution, and employment.
Which level of economic integration presents an alliance of all policies by a common organization?
Free trade area
Customs union
Common market
Political union
Political union
Correct! A political union is defined as when a single nation is formed and a mutual organization confederates all policies.
Which level of economic integration is formed when trade barriers are removed between member countries but there is no mutual policy on trading with nonmember countries?
Free trade area
Political union
Common market
Customs union
Free trade area
Correct! The free trade area allows basic economic cooperation so member countries remove barriers to trade among themselves.
Which level of economic integration permits the free movement of capital, labor and technology from member countries?
Free trade area
Political union
Common market
Customs union
Common market
Correct! The common market permits the formation of economically integrated markets between member countries, removing trade barriers and any restrictions on the movement of labor, technology, and capital.
Which economic integration stage offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers?
Common market
Political union
Free trade area
Customs union
Customs union
Correct! A customs union offers economic collaboration by removing trade barriers between member countries and establishing a mutual trading policy with nonmembers.
Which drawback is involved when regional agreements are created?
Regions with higher economic development increase their gap over lower developed regions.
Companies experience higher overall costs.
Member countries will trade less with nonmember countries.
Countries move production to more expensive labor markets in member countries.
Member countries will trade less with nonmember countries.
Correct! When a regional agreement is made between countries, those members will trade more with each other and trade less with nonmember countries.
What is a benefit of creating a regional economic integration agreement?
Less import potential
Decreased competition
Increased national cultural identity
Improved financial growth
Improved financial growth
Correct! Trade agreements create more growth opportunities for countries to trade among themselves as barriers to trade and investment are removed.
What is an advantage of regional economic integration?
Employment shifts preserve member countries’ resources.
Continued discussions help nations gain additional political rights.
Flexibility on labor movement develops job opportunities.
Mergers and acquisitions encourage start-ups of small businesses.
Flexibility on labor movement develops job opportunities
Correct! Economic integration often removes labor movement restrictions, which help increase job opportunities.
What is a disadvantage of regional economic integration?
Labor movement restrictions narrow job opportunities.
The exclusion of external countries reduces global free trade.
Integrated agreements among a small number of countries create conflicts.
A higher number of trades lowers growth rates in less-developed countries.
The exclusion of external countries reduces global free trade.
Correct! Regional agreements may create trade barriers with nonmember countries, which lowers global free trade.
Which economic actors are suppliers of U.S. dollars?
Foreign companies purchasing a U.S. firm
Foreign firms exporting to the U.S.
Foreign tourists visiting the U.S.
Foreign investors buying bonds issued by the U.S.
Foreign firms exporting to the U.S.
Correct! These firms will earn U.S. dollars but will need their own currency to pay the workers based in their country; thus they are suppliers of U.S. dollars and demanders of their home currency.
Which economic actor benefits as the U.S. dollar weakens?
A U.S. tourist abroad
A foreign firm exporting to the U.S.
A U.S. investor abroad
A foreign investor in the U.S.
A U.S. investor abroad
Correct! A U.S. investor abroad invests money in another country by first converting U.S. dollars to a foreign currency, making the investment, then later converting+ it back to U.S. dollars. As the U.S. dollar becomes weaker, the rate of return on the investment is larger as the investor gets more U.S. dollars from converting back from the foreign currency.
Which agreement was implemented in 1994 and helped form a free-trade zone between Canada, the United States, and Mexico by decreasing tariffs and trade barriers?
CAFTA-DR
USMCA
NAFTA
MERCOSUR
NAFTA
Correct! This trade agreement was implemented in 1994 and had the described trading goals.
Which economic actor benefits as the U.S. dollar strengthens?
A U.S. investor abroad
A foreign tourist in the U.S.
A U.S. exporting firm
A foreign firm exporting to the U.S.
A foreign firm exporting to the U.S.
Correct! The firm earns U.S. dollars through export sales, then converts it back into their home currency. A stronger U.S. dollar would mean they can buy more of the home currency.
Which exchange rate regime allows a currency’s value to fluctuate according to the foreign exchange market?
Crawling pegs
Floating
Pegged
Fixed
Floating
Correct! This regime automatically adjusts to economic circumstances.
A farmers market has many vendors and consumers who all sell and buy the same produce at the same price.
Which type of market is represented?
Monopoly
Oligopoly
Monopolistic competition
Perfect competition
Perfect competition
Correct! Since vendors can enter and exit the market freely with no barriers and the products are homogenous, it is a pure competition.
A sole, national telephone company was found violating antitrust laws and was forced to separate into regional companies.
What caused the violation of the antitrust laws?
Reduced competition
Technological innovation
Service disruptions
Increased profits
Reduced competition
Correct! Antitrust laws are enacted to protect consumer’s rights to competition in the marketplace. The sole, national company was a monopoly, and no competition occurred.
Many countries from several geographic regions are accused of dumping steel into the U.S. market at unfairly low prices.
Which entity can the United States appeal to in order to correct this apparent market manipulation?
International Monetary Fund
World Bank
World Trade Organization
European Union
World Trade Organization
Correct! The World Trade Organization is designed to judge potential market manipulations of its members. The United States has accused several countries around the world of dumping steel.
Which of these agreements or treaties was to combat increased temperatures of global climate change?
Paris
Antarctic
Versailles
Maastricht
Paris
Correct! This agreement was completed in 2016 to stop or at least slow global warming. Not all countries agreed to these goals.
Which governmental entity was created to provide regulatory authority regarding pollution by industry?
Environmental Protection Agency
Department of Commerce
Department of Agriculture
Federal Bureau of Investigation
Environmental Protection Agency
Correct! The agency was created in 1970 to monitor industry and industry’s environmental practices. The agency is not under any cabinet-level department.
Which type of duty is required to take care of the collective environment across the nation?
Shared
Individual
Customs
Assigned
Shared
Correct! Nation states and industry have a shared responsibility to take care of the collective environment of the nation. Collectively, both can accomplish more.
What makes the enforcement of United Nations Environmental Program regulations difficult?
World Food Program distributions
Pure competitive markets
Sovereign rights of nations
Peacekeeping missions of nations
Sovereign rights of markets
Correct! The sovereign rights of nations preclude the United Nations from enforcing the regulations. United Nations compliance is normally voluntary and agreements tend to be nonbinding.
A major footwear brand company is contracting the manufacturing of its products to a contractor’s manufacturing plant overseas. The footwear company has been accused of turning a blind eye to sweatshop practices at other overseas contract locations before.
How should the footwear company ensure that the contractor will comply with the standards set forth in the code of conduct that explicitly prohibit this practice?
Require that the factories be available for inspections
Require the contractor to self-report compliance on a monthly basis
Prohibit the use of worker overtime
Restrict authorization to daytime shifts
Require that the factories be available for inspections
Correct! Making the factories available for inspections and audits, sometimes unannounced, is a best practice to ensure compliance with the code of conduct.
Which action is used by companies wishing to avoid working with vendors who use sweatshops?
Establishing national child labor laws and requiring vendors to comply with them
Sending a whistleblower to the job sites to ensure the vendor practices safe working conditions
Allowing vendor practices to be flagged by nongovernmental organizations such as the National Labor Committee
Developing and imposing a company internal code of conduct for vendor labor practices
Developing and imposing a company internal code of conduct for vendor labor practices
Correct! A code of conduct for vendors is contractually imposed, and often publicly posted, to ensure the reputation of the company is protected.
What did the Worst Forms of Child Labor Convention, 1999 define?
Rights for domestic workers
Hourly wage rates
Rules of workplace of safety
The age at which a person becomes an adult
The age at which a person becomes an adult
Correct! The Worst Forms of Child Labor Convention defines a child as an individual younger than 18 years old.
Which convention protects decent working hours for a cruise ship director who travels in international waters?
Equal Remuneration Convention
Forced Labor Convention
Domestic Workers Convention, 2011
Maritime Labor Convention, 2006
The Maritime Labour Convention
Correct! The Maritime Labour Convention, sometimes called the “Seafarer’s Bill of Rights,” protects the rights of seafaring workers and is law for multiple countries. This convention protects decent working hours for a cruise ship director that travels in international waters.
Which two primary sources of law govern contracts in the United States?
The common law and U.S. Supreme Court
The UN Convention on Contracts for the International Sale of Goods and a vertical structure
The common law and the Uniform Commercial Code
The UN Convention on Contracts for the International Sale of Goods and a horizontal structure
the common law and Uniform Commercial Code
Correct! Common law comes from custom and from precedents set by other court decisions. The Uniform Commercial Code provides some a standardized laws and regulations for commercial transactions such as sales. They are the two primary sources of law that govern contracts in the United States.
Which result occurs when a legally enforceable contract between two businesses from different countries is broken?
The party who has been affected can seek damages.
The party who broke the contract cannot sell goods.
The broken contract impacts political policy making.
Resolution of the contract must be secured in 90 days.
The party who has been affected can seek damages.
Correct! When a legally enforceable contract is broken, the party who has been affected can seek damages so the business can be made whole as if the breach of contract did not occur.
How is contract law structured as it applies to global business among nations?
Tribunal
Arbitral
Vertical
Horizontal
Horizontal
Correct! A horizontal business structure means that no nation is in a legally dominant position over another.
Which condition is part of a contract between international companies that are based in different nations?
A provision against arbitration clause
A choice of law clause
A clause against unfair contract terms
A structure that is vertical in nature
A choice of law clause
Correct! A choice of law clause specifies the laws and the jurisdiction under which international disputes will be settled. International businesses operating in different countries include such clauses in their contractual agreements to clarify ahead of time how disputes will be settled.
Which intellectual property right describes a chemical company’s filing on their innovative industrial process invention?
Copyright
Patent
Trademark
Service mark
Patent
Correct! A patent is filed to protect the right to an innovative invention, which must be a manufactured product, an apparatus, chemical composition, or a manufacturing process.
Which organization aims to develop a global intellectual property infrastructure?
WRC
TRIPS
WTO
WIPO
WIPO
Correct! This stands for World Intellectual Property Organization. Its goal is to develop a global IP infrastructure, build international respect for IP, and implement global policy related to IP.
What is the agreement that the World Trade Organization has between its member nations that governs all intellectual property laws?
Alternative Dispute Resolution (ADR)
United States Trade Representative (USTR)
World Intellectual Property Organization (WIPO)
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Correct! This agreement by the WTO governs all IP laws
What does business ethics implicitly regulate?
Consumer preference
Employee behavior
External stakeholders
Consumer action
Employee behavior
Correct! Employers want employees to self-regulate so that when a stimulus appears they will take proper action in the interest of everyone involved, either directly or indirectly.
A company sells products that many have reported on social media to be culturally insensitive, and sales have decreased significantly since the negative publicity began.
How are consumers responding to the publicity?
By notifying government agencies
By considering sustainability
By focusing on supply chain
By voting with their purchases
By voting with their purchases
Correct! Consumers who do not believe the product is made in alignment with their values may not buy the product. Not buying the product is considered voting with one’s wallet.
A global buyer reviews a company’s ethical profile and the social responsibility section of its annual report. Understanding that the company’s values match the buyer’s principles, the buyer purchases the company’s products.
Which action did the buyer perform regarding the purchase of the company’s products?
The buyer practiced shareholder activism.
The buyer used organizational ethics.
The buyer practiced ethical consumerism.
The buyer used personal ethics.
The buyer practiced ethical consumerism
Correct! When a person evaluates a company’s values and then makes purchases from the company based on the person and company’s matched values, this is ethical consumerism.
A business has experienced significant internal and external events, and the owner decides to respond effectively while maintaining the rules of behavior the company has always vocalized as being appropriate.
Which component has guided this owner’s response?
Ethical standardization
Personal ethics
Ethical conundrum
Organizational ethics
Organizational ethics
Correct! Organizational ethics is how a business responds to stimuli in an ethical manner.
A coffee company received international criticism for an employee negatively responding towards a customer. The response was said to be racially motivated. The company needs to take swift action to improve how all employees in the organization are viewed by ethical consumers.
Which course of action should the company take to meet this goal?
Show instances of employees helping that population
Give the person affected company gift cards
Have employees attend sensitivity training
Fire the worker’s supervising manager
Have employees attend sensitivity training
Correct! This is a solution that addresses the entire company and does not cause harm to any employees for any mistakes.
A company that released a new vehicle marketed as being environmentally friendly is found to have cheated when testing the vehicle’s total emissions. The company would like to repair damage from the negative publicity by changing its image and catering more to ethical consumers.
Which action should the company take to reach this goal?
Market the original product strongly so ethical consumers receive the information
Retest the vehicles using its own test environment and protocols
Hire a new leader to send the message that practices have changed
Ask political supporters to modify the environmental emission regulations
Hire a new leader to send the message that practices have changed
Correct! Establishing a new image and leader can help consumers trust the company again after practices have changed.
A company is reviewing how ethical consumerism is being addressed in the organization. It is hoping to improve its awareness of this factor and how it will influence future business decisions.
How does this factor affect business decisions?
Companies that make good financial decisions will be perceived well by the public.
Companies must consider the age of the intended audience for a product.
Companies that hide their production methods can avoid negative impacts of ethical consumerism.
Companies must remember that their consumers may care about more than just the final product.
Companies must remember that their consumers may care about more than just the final product.
Correct! Nearly half of North American consumers report punishing a company by not purchasing a product if they disagree with its manufacturing or other business practices.
Which term describes the normative beliefs and practices passed from generation to generation that help define a group of people?
Cultural norms
Legal norms
Office norms
Graft norms
Cultural norms
Correct! Shared and integrated systems of beliefs and practices that are passed down through generations and characterize a cultural group are cultural norms.
An American salesperson is attempting to do business in a Middle Eastern country.
What is one of the major cultural issues the salesperson needs to understand about this part of the world?
It is more relationship-based than the United States.
It is more rules-based than the United States.
Individualistic culture is stronger in the Middle East than in the United States.
Secular culture is stronger in the Middle East than in the United States.
It is more relationship-based than the United States
Correct! Compared to United States and other Western cultures, relationships, including those in business, are more important.
A global company has warned managers that the country involved in their current business venture typically expects small payments to be made to government officials to expedite decisions and transactions. The company has encouraged managers to avoid this type of unethical practice.
Which form of activity is the company concerned about?
Oil payments
Grease payments
Unfair competition
Trade policies
Grease payments
Correct! When a business engages in making small payments to government officials to expedite activities, it is a grease payment.
What is the purpose of internal controls?
To ensure the accuracy of a system’s performance
To establish procedures for manufacturing operations
To ensure irregularities of a system’s performance
To create processes for credentialing accounting staff
To ensure the accuracy of system’s performance
Correct! Internal controls are built into a system to help guarantee the accuracy and reliability of the financial and accounting information. Internal controls should ensure systems run efficiently, effectively, and accurately and that they reduce accounting misstatements.
How should a company ensure that internal controls are effectively implemented?
By performing due diligence with procedures
By creating systems that are new to the company
By providing financial data to shareholders
By simplifying procedures in accounting
By performing due diligence with procedures
Which of the following will cause shrinkage in accounting?
Perishable goods going recorded
Management of inventory
Petty theft
Customer trust decreased
Petty theft
Correct! Discrepancies are unintentional accounting errors due to reasons such as incorrectly entered data and shrinkage. Petty theft, mismanaged inventory, and perishable goods going unrecorded can cause accounting shrinkage.
A company requires one employee to be responsible for maintaining a machine. Another employee is responsible for maintaining accounting records for that machine.
Which internal control has the company implemented?
Reviewing cash flows
Managing inventory
Accounting for shrinkage
Segregating duties
Segregating duties
Correct! Irregularities are intentional accounting errors with the purpose to defraud, and this action is used as an internal control to prevent irregularities.
An international company has created a diagram to show the division of labor between departments.
What is the name of this diagram?
Vertical linkages
Horizontal linkages
Flowchart
Organizational chart
Organizational chart
Correct! Companies use an organizational chart to depict the division of labor in the organization.
An international company wants to establish links between the people at the same level of the organization to form committees.
What is the name for this type of link in a company?
Cooperative
Vertical
Horizontal
Contractual
Horizontal
Correct! Horizontal links are links between people at the same level in an organization to accomplish tasks, such as forming committees.
Managers in an international company are arranging jobs so similar tasks are coordinated.
Which activity is being completed by this company?
Segmentation
Aggregation
Delegation
Departmentalization
Departmentalization
Correct! When a company divides its work based on specific tasks or jobs, it is referred to as departmentalization.
Managers at an international business are deciding the method by which it will be organized. The business is highly diversified, manufacturing a number of different components and parts for its industrialized customers.
Which departmentalization structure should be used by this company?
Product
Market
Geographic
Functional
Product
Correct! When an organization is built around the products or services it sells, it is using a product departmentalization structure.
A company that operates in two or more countries
Multinational corporation
An employee feels empowered to make decisions to solve customer problems independent of seeking manager approval and uses flexibility to meet customer needs.
Which decision-making structure is being used by this employee?
Functional
Matrix
Centralized
Decentralized
Decentralized
Correct! Decentralized decision-making structure is when lower-level employees, like the one mentioned, make decisions. This type of decision-making may be inconsistent.
A fast food company seeks to expand internationally and changes its menu to appeal to the new country’s food tastes.
Which action is being sought by the company by making this change?
Local responsiveness
Global integration
Economy of scope
Economy of scale
Local responsiveness
Correct! The company is responsive to its local environment when it adapts it products and services to local consumer tastes.
A company wants to gain market share but does not want to establish operations in other countries nor tailor its products to the other countries.
Which entry strategy should the company use to meet this goal under these conditions?
Joint venture
Transnational
Export
Multidomestic
Export
Correct! The scenario describes a company that is strictly domestic but wants to earn additional revenue by sending the product overseas. Normally, a company in the other country must import the product for sale.
A car company wants to expand internationally but encounters much international competition to reduce cost while responding to local needs.
Which strategy should the company use to meet this goal under these conditions?
Transnational
Export
Web
Communication
Transnational
Correct! This strategy is one in which a company must be nimble to respond to cost pressures while customizing products to local markets. Transnational strategies have to deal with the problems of standardization (cost) and multidomestic strategies (local responsiveness).
A company decides to focus on economies of scale to decrease production costs and increase revenues.
Why is this strategy effective?
Manufacturing in small quantities minimizes operational costs.
Ordering in large quantities takes advantage of bulk pricing.
Ordering in small quantities ensures that shipping costs stay low.
Manufacturing in large quantities keeps costs low.
Manufacturing in large quantities keeps costs low.
Correct! Manufacturing in large quantities means more work can be done efficiently and at a savings. This reduces productions costs and increasing revenues.
When expanding internationally to a country with a lower average income, a company made efforts to reduce the price of its product, even though it eliminated some of the benefits the product has in other markets. This allowed for greater sales in the new market.
Which strategy is being used by this company?
Adaptation
Standardization
Multibrand
Global
Adaptation
Correct! Product adaptation is when a product is changed to be more appealing in a specific market.
A company owner is considering manufacturing using a global standardization strategy to achieve economies of scale.
Why is this strategy effective?
It decreases shipping costs.
It improves manufacturing processes.
It manufactures the same product for all markets.
It ensures product safety is maintained.
It manufactures the same product for all markets.
Correct! Standardizing products globally means that regardless of the place of manufacture, the product can be sold in any market.
A company has decided that a foreign direct investment should be made during the next quarter to strengthen the organization.
Which method should be used for this purpose?
Licensing
Exporting
Establishing a greenfield venture
Establishing a joint venture with another company
Establishing a greenfield venture
Correct! In a greenfield venture, a company creates a subsidiary in another nation from the beginning. International markets are commonly entered through this means, and subsidiaries are considered foreign direct investment strategies.
An individual is considering entering the global market via a franchise.
Which outcome should be expected by the individual if this approach is used?
Limited access to the franchiser’s brand and trademarks
Majority of financial risk
Low access to advertising and product training
Limited name recognition
Majority of the financial risk
Correct! In opening a new location, the franchisee typically takes most of the financial risk.
A country’s corporate culture requires that most of the decisions be made by senior management, and entry-level positions are viewed as having much less status and respect.
Which of Hofstede’s cultural dimensions is being used by this country?
Long-term orientation
Restraint
Power distance
Uncertainty avoidance
Power distance
Correct! Power distance is high in the country described above, in which most of the authority and respect are at the upper ranks.
A country that values spontaneity and freedom to satisfy human desires provides its citizens business opportunities to prosper in these areas.
Which of Hofstede’s cultural dimensions is the country exhibiting?
Power distance
Long-term orientation
Indulgence
Masculinity
Indulgence
Correct! This dimension seeks to emphasize pleasure and spontaneity. Because the culture focuses on self-enjoyment, people become entrepreneurial in how to achieve pleasure. The United States rates high on this dimension.
A U.S. employee believes that each individual is responsible for one’s own success and finds it challenging to work in cultures that emphasize collaborative approaches to decision-making.
Which aspect of Hofstede’s cultural dimensions is exemplified by this employee?
Long-term orientation
Power distance
Individualism
Uncertainty avoidance
Individualism
Correct! Individualism describes the extent to which individuals take responsibility for their own destinies and choose their own goals over a company’s goals. The U.S. employee believes that each individual is responsible for personal success, which represents individualism.
John is the president of a company that is based in Atlanta. This company, which manufactures office items that stick to walls, furniture, and other items, has been very successful in its first five years, so John decides that he would like to expand the business globally and has chosen to start in the Philippines. What is one of the first things he should do?
Email the local government in the Philippines
Conduct a market survey in the Philippines
Research the history and politics of the Philippines
Talk to the local people in the Philippines
Research the history and politics of the Philippines
Correct! It is critical to understand the culture, history, and politics of the Philippines before opening a business there.
A company’s chief executive officer (CEO) wants to expand the company into China and is reviewing the Chinese word guanxi, the basis of all business in that country.
Which English meaning must the CEO understand in regards to this Chinese concept?
The die is cast.
If God is willing.
All is well that ends well.
You owe me one.
You owe me one.
Correct! Guanxi is based on relationship building, which can be good or bad. The Western equivalent is “You owe me one.”
Which Latin American phrase (translated into English) typifies how time is viewed, which can make conducting business frustrating to Northern European companies seeking to expand in Latin America?
Time is circular.
Time is a social construct.
Time is money.
Time is space.
Time is space.
Correct! Latin America views time as being subordinate to relationships and situations. Individuals in Latin America will be late to a meeting if an earlier meeting requires time for relationship development or connections need to be made.
A chief executive officer (CEO) of a Scandinavian company sought to expand operations in Japan through a joint venture. When the CEO asked the Japanese business owner whether she was committed to the venture, the business owner responded with a flat-toned “yes.” The outcome the CEO expected did not happen, and the joint venture failed.
What was the CEO’s misinterpretation in this communication?
The response indicated excitement.
The response indicated possibility.
The response indicated misunderstanding.
The response indicated agreement.
The response indicated agreement.
Correct! In Japan, the word “yes” can mean things other than agreement, including “maybe” or “I understand you.”
A company’s chief executive officer (CEO) emphasizes to other executives in the foreign country’s joint venture that the CEO’s culture should take precedence over other cultural systems since it is superior.
Which type of viewpoint is the CEO demonstrating regarding culture?
Ethnocentrism
Individualism
Power distance
Uncertainty avoidance
Ethnocentrism
Correct! Ethnocentrism is the viewpoint that one’s culture is superior to others and should be used as a measure. The CEO is demonstrating this viewpoint in the scenario.
A company wants its expatriates to receive the best training to adapt to the local environment in the host country.
What is the goal of this training?
Obeying local law
Cultural homogeneity
Cultural agility
Making a profit
Cultural agility
Correct! The goal of choosing the correct training is to provide the expatriate with cultural agility to best integrate into the host nation’s culture.
A company is considering establishing a subsidiary in a new host country and wishes to prepare its expatriates to adapt to the local environment.
How should this company prepare its expatriates?
Operational training
Cultural training
Negotiation
Repatriation
Cultural training
Correct! This will help prepare the company and its employees for integrating with new ethnic groups in a new culture.
An employee has assumed an expatriate role and is studying textbooks to learn about cultural differences in order to function smoothly in the new setting.
Which helpful secondary source training is the expatriate using?
Foreign language
Field simulation
Cultural simulation
Documentary
Documentary
Correct! Documentary training uses traditional methods such as textbooks and the classroom environment to focus on educating expatriates about cultures. The expatriate is studying textbooks to learn about cultural differences in order to function smoothly in the new setting.
An employee who is scheduled to become an expatriate has successfully passed the survival training stage.
What type of training is used by the company after passing this stage?
Cultural simulation
Documentary
Workshop
Field simulation
Field simulation
Correct! When an employee has been through the other stages of training, field simulation training is next.
A company operating in a foreign country hires and conducts business according to the cultural practices in its home country.
Which approach to human resource management is used by this company?
Geocentric
Ethnocentric
Polycentric
Monocentric
Ethnocentric
Correct! When a company uses the same human resource policies and practices in the host country as it uses in the home country, it is using an ethnocentric approach.
A company would like to use a human resource approach that leads to more fluid movement among employees and creates diversity in the workforce. Assignment decisions are made jointly by the headquarters and the field offices.
Which human resource approach should be used by this company?
Ethnocentric
Geocentric
Multicentric
Polycentric
Geocentric
Correct! A geocentric approach coordinates the best employees worldwide, leading to diversity and employee movement.
What is the term for the services a company provides when it helps an employee who has worked in a host country make the transition back to the home country?
Orientation
Repatriation
Documentary training
Field training
Repatriation
Correct! Repatriation is the process of helping employees who have worked in a host country make the transition back into their home country.
Which model of supply chain management focuses on the product and its production?
Push
Value
Distribution
Pull
Push
Correct! In this model of supply chain management, all parts of the production process focus on how to produce the product and then move it through the distribution channel to the customer. The marketing process focuses on pushing the product on the consumer.
An aircraft manufacturer uses a supply chain management system in which parts of the aircraft are made in different countries and assembled at the company’s headquarters.
Which type of supply chain is the company using?
Pull
Multinational
Distribution
Push
Multinational
Correct! Multinational supply chains seek to use production strengths and low costs of different suppliers around the world. Using a multinational supply chain reduces the risk of a catastrophic event, reducing a company’s ability to produce a product.
A company wishes to expand internationally in countries that have high tariffs on the product the company makes. The company decides to use foreign direct investment because the labor costs are low and the country is politically stable.
Which type of production is the company using?
Global sourcing then using the home country for assembly
Manufacture in the host country then export to the home country
Manufacture in the home country then export abroad
Production in the host country then local retailing
Production in the host country then local retailing
Correct! In countries with high tariffs on a product, for example an automobile, a company will produce the vehicle in the host country and sell that automobile in the host country thus avoiding the tariffs.
A company wishes to make a foreign direct investment in a new country where it can make and test products more easily. While local suppliers would not normally meet the requirements for its products, this new plant will accept them.
Which factor affected the company’s production location?
Cost
Incentive
Innovation
Growth
Innovation
Correct! The company is using the foreign direct investment to use local suppliers to make and test the new products. The company is using the location to promote innovation.
A company wants to move production offshore to a low-skilled labor company because the company’s machines will make the product and it only needs these low-skilled operators to work the machines.
Which advantage of outsourcing does the company seek to take?
Enhanced expertise
Lower costs
Greater discipline
Focus on core activities
Lower costs
Correct! In this advantage, the company seeks another to produce the products in a place of lower labor cost. The company in the scenario is seeking these low-skilled operators to reduce costs.
Which company relationship is negatively affected if the company uses outsourcing to reduce costs?
Supplier
Employee
Stockholder
Auditor
Employee
Correct! Outsourcing will cause some employees to lose their jobs. Fear can grip the company if outsourcing of production or another major element of the company is outsourced or moved offshore.
A farmer sells sweet corn to customers at a local farmers market.
Which marketing channel is being used by the farmer?
Direct
Push
Indirect
Pull
Direct
Correct! When a producer sells to customers, it is a direct marketing channel.
Which advantage is an outcome of exporting products to a developed country?
Smaller retail shops
Better established infrastructure
Higher percentage of rural residents
Fewer available distributors
Better established infrastructure
Correct! Developed countries have better established infrastructures that make it easier to distribute products.
Which advantage do intermediaries offer when a manufacturer uses an indirect marketing channel to distribute its products?
Broader knowledge about the existing markets
Faster distribution times to consumers
Stronger connection to customer base
Increased control of product distribution
Broader knowledge about the existing markets
Correct! One of the main reasons to use an indirect channel is that the marketing intermediaries to which the producer sells may know more about the markets.
Which distribution system should be used by a company wanting to maximize its control over the distribution of its products when entering a new country?
Product licensing
Building its own
Acquiring a local partner
Joint venture
Building its own
Correct! A company that wants to control the distribution process should create its own system.
Which type of investor secures funding from a number of speculative financiers and pursues strong global business opportunities still in the start-up phase?
Personal contacts
Strategic partnerships
Crowdsourcing
Venture capitalists
Venture capitalist
Correct! Venture capitalists provide high amount of capital to early-stage, emerging firms that are deemed to have high growth potential.
Which source permits a high number of funders to each participate with a small amount of capital and cumulatively contribute to a new venture?
Venture capitalists
Crowdsourcing
Angel investors
Personal contacts
Crowdsourcing
Correct! Crowdsourcing is a model in which finances are gathered from a large group of funders. It divides investments between participants to achieve a cumulative result.
Which financing source provides funding for capital through private connections with help limited to monetary contributions?
Angel investors
Crowdsourcing
Venture capitalists
Personal contacts
Personal contacts
Correct! Personal contacts can provide funding, which is usually only for capital, and do not include help beyond monetary contribution.
Which organization formed in 1970 supplements the funding available from commercial banks and other lenders to support U.S. exports?
Japan External Trade Organization (JETRO)
Overseas Private Investment Corporation (OPIC)
Private Export Funding Corporation (PEFCO)
Export-Import Bank of the United States (Ex-Im Bank)
Private Export Funding Corporation (PEFCO)
Correct! This is a private-sector organization formed in 1970. It aims to support the funding of U.S. exports by supplementing the funding available from commercial banks and other lenders.
Which U.S.-based set of accounting principles was created to establish rules and regulations for financial accounting?
IFRS
IASB
GAAP
FASB
GAAP
Correct! Generally Accepted Accounting Principles (GAAP) were created in the United States to deliver financial accounting direction and regulation.
What is the purpose of the IASB?
Creating standards of accounting for the United States
Enforcing compliance to IFRS
Creating international standards of accounting
Enforcing compliance to GAAP
Creating international standards of accounting
Correct! The IASB is responsible for creating international standards of accounting.
Which set of standards establish international accounting regulations and reporting expectations?
FASB
IASB
GAAP
IFRS
IFRS
Correct! International Financial Reporting Standards (IFRS) is a set of standards by the International Accounting Standards Board (IASB) that establishes international accounting standards and reporting expectations.
Which self-governing group is supported by the U.S. government, various accounting establishments, and privately owned companies to establish accounting standards?
FASB
GAAP
IASB
IFRS
FASB
Correct! The Financial Accounting Standards Board (FASB) is self-governing and supported by the U.S. government, various accounting establishments, and privately owned companies.
Which globalization risk involves governments and the relationships between countries?
Legal
Political
Economic
Cultural
Political
Correct! Political risk involves governments and the relationships between countries.
Which globalization risk refers to the adherence to laws of countries in which an organization may operate?
Legal
Political
Economic
Cultural
Legal
Correct! Legal risk involves adherence to the laws of countries in which an organization may operate
Which globalization risk involves the societal expectations and standards of an organization operating in a foreign environment?
Legal
Cultural
Political
Economic
Cultural
Correct! Cultural risk is related to companies’ operating in a different sociocultural environment.
Which globalization risk refers to the level of financial stability in a country?
Legal
Cultural
Political
Economic
Economic
Correct! Economic risk involves the level of financial stability in a country.
Which currency contract establishes a specific rate at the beginning of the contract for delivery at a future date?
Forward
Swap
Futures
Option
Forward
Correct! In the forward contract, a firm agrees to pay a specific rate at the beginning of the contract for delivery at a future date.
Which currency contract allows for a trade of specific amount of money and exchange rate on a defined date to hedge risk in the global environment?
Forward
Swap
Futures
Options
Options
Correct! Option contracts offer the owner the right to a specified exchange rate for a particular quantity of money on a particular date but do not oblige the owner.
Which currency contract requires a specific exchange rate and quantity of money on a subsequent date?
Swap
Future
Option
Forward
Future
Correct! Futures contracts oblige an exchange of a certain amount of currency on a defined date and rate.
Which currency contracts are two-way agreements to trade currency on different dates?
Option
Future
Swap
Forward
Swap
Correct! Swap contracts are two-way agreements to exchange currency on different dates.
A multinational corporation would like to maximize profits by moving products to international subsidiaries to gain tax advantages.
Which pricing strategy should this corporation use for this purpose?
Optional
Promotional
Transfer
Bundle
Transfer
Correct! Transfer pricing involves conducting business among cross-border subsidiaries, often producing the product in the country with the lowest costs and tax rates.
Which areas traditionally suffer from the digital divide?
European cities
Metropolitan areas
Rural areas
American cities
Rural areas
Correct! Rural areas are less likely to have high speed internet causing them to be unable to access information on the internet.
A company is in a geographic area with low literacy levels, and the surrounding population does not understand the benefits of a computer and the internet. Due to this lack of information, the individuals are not able to use the digital technology to its full potential, and this is negatively impacting the company’s business plan.
Which type of divide must this company manage?
Accessibility
Usability
Empowerment
Economic
Usability
Correct! If an individual does not know how to fully access the internet and the economic benefits it can bring, then a usability divide occurs.
What is considered the most vital area needing information and communication technology (ICT) intervention?
Finance
Remote areas
Education
Agriculture
Agriculture
Correct! Agriculture is the most vital area needing ICT intervention. ICT helps farmers learn about crop pricing and informs farmers about the status of their crops as well as information about irrigation of their crops.
Why are bots on customer-facing websites and apps valuable for global companies?
They can redesign the website or app on the fly.
They can eliminate hold times.
They are accessible 24 hours per day.
They can be deployed to perform services for customers.
They are accessible 24 hours per day.
Correct! Bots can perform simple data collection from customers and can even handle simple customer needs. The capabilities of bots is expanding all of the time, and their functionality can vary from business to business.
A company is beginning to operate on a more complex global scale and needs a seamless integration of all the data the business uses. This integration must include data from human resources (HR), employee data, sales information, and development figures.
Which type of software solution should be used for this purpose?
Enterprise resource planning
Material requirements planning
Spreadsheet program
Desktop publishing
Enterprise resource planning
Correct! Enterprise resource planning (ERP) is a type of software solution design to integrate all a company’s data. ERP would integrate data from human resources (HR), employee data, sales information, and development figures.
A company needs an electronic filing system that collects and organizes information for analysis.
Which solution should be used for this purpose?
Groupware
Word processing
Desktop publishing software
Database management system
Database management system
Correct! A database management system (DBMS) allows businesses to store and analyze large amounts of data to identify trends, produce reports, and other analysis.
Which term refers to the indistinguishable combination of what is human and what is technology?
The Fourth Industrial Revolution
The Market Revolution
The Agricultural Revolution
The American Revolution
The Fourth Industrial Revolution
Correct! The Fourth Industrial Revolution refers to the indistinguishable combination of what is human and what is technology such that it is difficult to tell where human ends and technology begins.
Which technology is instrumental in the development of self-driving cars?
3-D Printing
Nanotechnology
Biotechnology
Artificial intelligence
Artificial intelligence
Correct! Self-driving cars are being operated by artificial intelligence
Which technique allows customers to store personal information such as credit card data in one list of records and maintain total ownership and control over such information?
Open source software
Biometrics
Blockchain
Artificial intelligence
Blockchain
Correct! Blockchain technology allows customers to save information in a continuous block or record for security purposes.
How does General Data Protection Regulation (GDPR) help protect people’s personal data?
Users are required to opt in explicitly to grant permission for sensitive data.
Users must be notified of data breach within 24 hours of awareness.
Companies that breach the policies of the GDPR can be fined up to 25% of their annual global turnover.
The regulation applies to all European companies processing data of worldwide citizens.
Users are required to opt in explicitly to grant permission for sensitive data.
Correct! Users are required to opt in explicitly to grant permission for sensitive personal data.
What was one of the results of the Uruguay Round of the World Trade Organization negotiations?
Decrease in world-wide money supply
Increase in world-wide money supply
Increase in tariffs
Decrease in tariffs
Decrease in tariffs.
Correct! The major accomplishment of the Uruguay Round of the World Trade Organization negotiations was a reduction in the number and size of tariffs.
Which strategic network was established to work towards decreasing tariff rates and protecting commerce and intellectual property globally?
North American Free Trade Agreement (NAFTA)
European Union (EU)
World Trade Organization (WTO)
International Monetary Fund (IMF)
World Trade Organization
Correct! The WTO was established to work towards decreasing tariff rates and protecting the trade of goods, services, and intellectual property.
Which organization was formed after World War II to encourage international commerce?
Federal Reserve
World Trade Organization
European Central Bank
International Monetary Fund
World Trade Organization
Correct! The World Trade Organization was formed after World War II to encourage international trade by creating a mechanism to negotiate trade agreements.
Which criticism is made about the World Trade Organization (WTO)?
It increases the quantity of money in the worldwide economy.
It protects developing countries more than developed countries.
It decreases the quantity of money in the worldwide economy.
It protects developed countries more than developing countries.
It protects developed countries more than developing countries.
Correct! One of the criticisms of the WTO protects developed countries more than developing countries.
How is global business positively affected by intercultural exchange?
It decreases the rate of change associated with industrial colonization.
It decreases complexity to improve commercial identities.
It increases the uniqueness of the national community.
It increases worldwide connections that support commodity trading.
It increases worldwide connections that support commodity trading.
Correct! The spreading of ideas, meanings, and values around the world enables and enhances the commodity exchange process.
How does globalization support tolerance for different people and ideas?
By improving global wages
By increasing the access to information
By strengthening protectionist tendencies
By enhancing global morality
By increasing the access to information
Correct! Globalization increases access to others, which in turn, increases access to a variety of information.
A business has recently started selling in a new global marketplace. Shortly after the company made this global expansion, the new country opted to implement ad valorem tariffs. How will this change affect the company?
It will levy a tax based on the value of goods imported, causing this company to export less.
It will provide increased corporate tax breaks.
It will levy a fixed tax on the goods imported.
It will impose a value-added tax on corporate profits.
It will levy a tax based on the value of goods imported, causing this company to export less.
Correct! Ad valorem tariffs are taxes calculated as a percentage of the value of the goods imported and are used to regulate imports and raise revenues for the government.
Which business component does the TRIPS agreement help protect for member nations?
Policies that member nations use to conduct business in other member nations
Intellectual property protection for all member nations
Standard transportation agreements between member nations
Agreements between member nations to protect manufacturing patents
Intellectual property protection for all member nations
Correct! The TRIPS agreement incorporated intellectual property rights into the World Trade Organization.
A business operating globally wants to increase its overall production efficiency. Which strategy should the business use?
Enhance international relationships
Focus on specialization
Maximize labor force
Improve trade regulations
Focus on specialization
Correct! When a business adds technology to its process, it allows the business to maximize economies of scale.
The German government has imposed a specific tariff on T-shirts imported from Cambodia. How does this specific tariff affect the T-shirt producers in Germany?
It decreases German T-shirt producers’ profit.
It does not have any impact on German T-shirt producers.
It protects German T-shirt producers.
It will decrease German T-shirt producers’ sales quantity.
It protects German T-shirt producers.
Correct! The German T-shirt producers will benefit from the higher selling price of the imported T-shirts caused by the tariff and will get more profit.
Countries A, B, and C have a trade agreement. Country C imposes high tariffs on all raw materials imported from Country A, and Country B imposes a lower tariff on the same raw materials imported from country A. What is the effect of this set of actions on these countries?
Country A will do more business with Country C.
Country A will cease doing business with Countries B and C.
Country A will do more business with Country B.
Country A will do the same amount of business with Country B and Country C.
Country A will do more business with Country B.
Correct! Country A will do more business with Country B, due to the lower tax rate.
A multinational corporation (MNC) in a country with a strong labor union is seeking to move its production facility overseas.
Which factor is a benefit of this action?
Overcoming competitive intensity in the industry
Decreasing labor costs
Identifying new markets overseas for new customers
Moving away from regulatory issues related to operations
Decreasing labor costs
Correct! Multinational corporations tend to save a lot in labor costs by moving operations overseas. As they seek to lower costs by taking advantage of lower wages overseas, they have better negotiation power with the unions in their home country.
What is enhanced when creating regional trade agreements?
National cultural identity
Global trade integration
Economic opportunity
Labor restrictions
Economic opportunity
Correct! Regional trade agreements create more opportunity for countries to trade with one another by removing barriers to trade.
A firm based in Country A exports products to Country B. The currency in Country A is stronger than the currency in Country B. Which strategy should the firm use to maximize profits?
Reduce the selling price of foreign sales
Reduce domestic sales and increase its exports to Country B
Increase the selling price of domestic sales
Increase domestic sales and reduce its exports to Country B
Increase domestic sales and reduce its exports to Country B
Correct! The currency the firm is receiving from foreign sales is worth less than the currency it receives from domestic sales, making it more profitable to sell domestically.
Which effect does a command economy have on the process of globalization?
The economy is competitive, so the globalization process will be slowed.
The economy is self-sufficient, so the globalization process remains unaffected.
The government is less flexible, so the globalization process is challenged.
The government encourages a free market, so the globalization process is accelerated.
The government is less flexible, so the globalization process is challenged.
Correct! A command economy results in a less flexible economy, so globalization is challenged as the government regulates economic production.
A company is conducting a legal risk analysis for a country that has a civil law system. Which statement accurately characterizes this legal system?
It is based on a detailed set of laws that form a code.
It permits judges to interpret the law.
It relies on the opinions of those well-trained in law.
It is a moral, not a commercial, system.
It is based on a detailed set of laws that form a code.
Correct! The civil legal system is based on a set of laws that form a code and it is based on how the law is applied to the facts.
Which fact should a company note when it opens its operations in the state of Louisiana?
The state follows a Talmudic law system.
The state follows a customary law system.
The state follows the canon law system.
The state has a mixed law system.
The state has a mixed law system.
Correct! The state of Louisiana follows a mix of both the civil and common law system, whereas the U.S. on the whole follows a common law system.
Which core principle of the World Trade Organization supports equality among member nations and helps fight discrimination among them?
Multilateral trade agreements
Free trade
Controlled tariffs
Most-favored-nation (MFN) status
Most-favored-nation (MFN) status
Correct! This principle states that countries must trade without discrimination for other countries.
What is true regarding free trade?
Free trade generates manufacturing jobs in developed countries.
Free trade leads to specialization of each country and increases production efficiency.
Free trade generates more losses than gains for participating countries
Free trade is weakened when countries join regional economic integrations.
Free trade leads to specialization of each country and increases production efficiency.
Correct! Free trade encourages countries to specialize in their comparative advantage area of production and gain economies of scale to improve production efficiency.
Countries A and B participate in trade agreements that allow free trade among participant countries. However, Country A imposed quotas on several imported products to protect its domestic products.
What is the effect, if any, on the domestic prices of these products?
Decreases
Stays the same
Cannot be determined
Increases
Increases
Correct! Restriction can serve to increase the domestic prices of the same products.
How do governments help companies offset the cost of manufacturing domestically?
Tariffs
Anti-trust laws
Anti-dumping laws
Subsidies
Subsidies
Correct! Subsidies are monies given to industry to keep prices competitive on a global level.
What would a mercantilist value the most?
Factors of production
Absolute advantage
Comparative advantage
A trade surplus
A trade surplus
Correct! Mercantilists wanted to help a nation gain trade surplus by encouraging exports and limiting imports.
A multinational corporation has manufacturing facilities in many Asian countries due to cheaper labor. Which strategy is the corporation using?
Market expansion
Acquisition of resources
Centralized portfolio management
Realignment of capital expenditures
Acquisition of resources
Correct! Resource acquisition will offer more capital, access to raw materials, and technology.
A firm in Country A exports products to Country B. The currency in Country B is strong relative to the currency in Country A. What does this mean for the firm?
Increased domestic sales
Decreased foreign sales
Less valuable export sales
More valuable export sales
More valuable export sales
Correct! When the currency from the point of sale in Country B is converted into the currency of Country A, it will buy more of that currency.
What is the directional nature of contracts between international businesses?
Horizontal contracts with horizontal legal structure
Vertical contracts with vertical legal structure
Horizontal contracts with vertical legal structure
Vertical contracts with horizontal legal structure
Horizontal contracts with vertical legal structure
Correct! The contracts between international companies are more like a treaty and are therefore horizontal in nature. However, since the parties choose which of the laws apply for resolution of disputes under the contract, the contracts also have vertical legal structure.
An employee at the U.S. Patent and Trademark Office was casually talking to a friend who worked at Company XYZ. The patent office employee mentioned that a pending patent application for Company XYZ was about to be denied, and the decision would become public in a few days. The public release of the report was likely to result in a severe reduction in the stock price of the company. The friend who worked at Company XYZ then placed an online trade transaction to sell all shares of stock they owned in Company XYZ the next day. Which specific law passed by the U.S. Congress did the Company XYZ employee violate?
Sarbanes-Oxley Act (SOX)
Freedom of Information Act (FOIA)
North American Free Trade Agreement (NAFTA)
Foreign Corrupt Practices Act (FCPA)
Sarbanes-Oxley Act (SOX)
Correct! The Sarbanes-Oxley Act (SOX), legislation passed by the U.S. Congress, is designed to address a lack of trust in corporate America by the investing public. SOX specifically addresses an employee selling stock based on information not known by the public.
A company is reviewing intangible assets that are covered by intellectual property laws.
Which asset is being reviewed?
Corporate securities
Copyright
Goodwill
Customer list
Copyright
Correct! Intellectual property law covers intangible assets like patents, trademarks, and copyrights.
What is true regarding the ensuring of competitive markets?
Successfully globalized economies strive to not attain competitive markets at home.
Governments try to maximize the role of state-owned enterprises in market economies.
Antitrust laws that promote free domestic markets tend to promote globalization.
Antitrust laws must be eliminated if competitive markets are to be sustained.
Antitrust laws that promote free domestic markets tend to promote globalization.
Correct! This statement is true about the competitive market.
Which international agreement involved nations committing to use their resources to limit greenhouse gas emissions?
Kyoto Protocol of 1997
National Environmental Policy
Environmental Protection Agency
World Trade Organization
Kyoto Protocol of 1997
Correct! The Kyoto protocol of 1997 aimed to reduce greenhouse gas emissions.
An individual works in a global office where it is typical to pay small, unofficial fees to top administrators in the city to gain an advantage. The individual agrees to pay the fee needed to expedite placement of a business phone line at home so work can be completed after normal work hours. What is this inducement called?
Installation fee
Grease payment
Kickback
Gratuity
Grease payment
Correct! A grease payment is a small inducement intended to expedite a transaction or service.
What is the reason to include a choice of law clause in the contract?
The UCC requires that the clause is included in contracts.
Parties who sign the contract are not familiar with the contract laws.
It specifies which law applies to any disputes that could arise under the contract.
The contract can be breached more easily.
It specifies which law applies to any disputes that could arise under the contract.
Correct. The choice of law clause is chosen in the contract to specify which country’s contract law is to be applied when disputes occur.
A U.S. organization has a factory in a foreign market that is well-known for sweatshops. To maintain the organization’s social responsibility, the organization describes the factories and working conditions to its customers via its website. Which practice is this company using?
Limiting cronyism
Using ethical transparency
Supporting ethical decision-making
Improving brand image
Using ethical transparency
Correct! Ethical transparency is sharing exactly what the organization is doing, especially in regard to working conditions.
Which term refers to a system of rules and procedures designed to ensure the accuracy and reliability of financial and accounting information?
Management controls
Internal controls
External controls
Legal controls
Internal controls
Correct! This is the definition of the internal control system.
A company is training new employees and helping them identify discrepancies.
Which scenario indicates a discrepancy that should be identified by the employees?
An accounting manager siphons a significant amount of funds from the company’s account.
An employee takes home high-quality office equipment.
A data entry technician unintentionally entered incorrect data into the system.
An employee fails to record large transactions with a customer.
A data entry technician unintentionally entered incorrect data into the system.
Correct! Incorrectly entered data is a discrepancy. The mistake was unintentional in this case.
A cruise ship employs over 200 workers over the course of 18 years. One worker describes terrible living conditions and the limited amount of food that employees are given to eat. Which labor convention is being violated by the employer?
Domestic Workers
The Maritime Labour
Geneva
Worst Forms of Child Labour
Correct! This convention sets out seafarers’ rights to decent working conditions.
The Maritime Labour
Correct! This convention sets out seafarers’ rights to decent working conditions.
What does Article 2 of the Uniform Commercial Code (UCC) govern?
The required conduct of the initiator of a contract
The standards for the countries from which the two businesses originate
The standards for the performance of business activities
The required conduct of both parties in accordance with the contract
The required conduct of both parties in accordance with the contract
Correct! Article 2 of the UCC governs the obligations of the two parties, specifically with respect to the offer.
A company is concerned about source code theft of digital property. The company is reviewing a law that governs this behavior. Which law is being reviewed by this company?
Anti-trust
Intellectual property
Labor
Contract
Intellectual property
Correct. Intellectual property law applies to digital property.
An employee at the U.S. Patent and Trademark Office was casually talking to a friend who worked at Company XYZ. The patent office employee mentioned that a pending patent application for Company XYZ was about to be denied, and the decision would become public in a few days. The public release of the report was likely to result in a severe reduction in the stock price of the company. The friend who worked at Company XYZ then placed an online trade transaction to sell all shares of stock they owned in Company XYZ the next day. Which specific law passed by the U.S. Congress did the Company XYZ employee violate?
Sarbanes-Oxley Act (SOX)
Freedom of Information Act (FOIA)
North American Free Trade Agreement (NAFTA)
Foreign Corrupt Practices Act (FCPA)
Sarbanes-Oxley Act (SOX)
Correct! The Sarbanes-Oxley Act (SOX), legislation passed by the U.S. Congress, is designed to address a lack of trust in corporate America by the investing public. SOX specifically prevents an employee from selling stock based on information not known by the public.
Which legislation is aimed at increasing ethical financial transparency in corporate America and affects foreign businesses that want to be listed on a U.S. stock exchange?
NAFTA
FTCA
SOX
FCPA
SOX
Correct. The Sarbanes-Oxley Act (SOX) is legislation aimed at increasing ethical transparency in corporate America and applies to foreign businesses that want to be listed on a U.S. stock exchange.
An American employee is working in a Chinese firm in China and notices an ethical violation. The employee tells a colleague, who is Chinese, and the colleague advises the American employee to save face. What does the Chinese colleague mean by this advice?
Report only if directly asked if a violation occurred
Ensure that the supervisor is aware of the situation to avoid being personally accused
Confront the people who are responsible since they could retaliate
Make sure that everyone knows the person who discovered the ethical violation
Report only if directly asked if a violation occurred
Correct! For Chinese, saving face means that the employee should not reveal information that may harm another unless directly asked a specific question.
What is the term for the concept that people should purchase goods and services from organizations that match their own values and beliefs?
Ethical consumerism
Consumer ethics
Organizational ethics
Ethical purchasing
Ethical consumerism
Correct! There is an industry that exists to provide information about the ethical behaviors of organizations to allow consumers to support organizations that align with their own personal values and beliefs.
Which action should a company take to change consumer perceptions of the company’s ethical standards due to a recent scandal?
Provide free products to everyone
Defend the organization’s actions
Remedy negative events immediately with change
Hold a town hall meeting to discuss events
Remedy negative events immediately with change
Correct! When the actions of employees become the center point of an organization, it is critical to respond with change to address and remedy the error in order to recover from a negative and unfortunate event.
A new employee has recently transferred from the U.S. headquarters to a foreign office, and a coworker has been assigned to help the employee become acclimated to the new location. The coworker decides that the best place to start is with a description of the culture of the region since it is significantly different from the United States.
Which piece of information is this coworker providing to this employee?
Business practices codified by current legislation
Business practices required of global companies
Details about universal ethical conduct
Details about how the community functions
Details about how the community functions
Correct! Culture describes a collective way of life and provides details on how the community functions in terms of their actions and beliefs.
