Question 1

Many commentators have blamed the problems that led to global financial crisis of 2008-2009, and the recession that followed on:
A)a lack of free markets.
B)a lack of regulation.
C)the political ideologies followed in the Asian countries.
D)a strong presence of command economies.
E)a lack of privatization and liberalization.

Accepted Answer

Many commentators have blamed the problems that led to the global financial crisis of 2008-2009, and the recession that followed on a lack of regulation, and some reassessment of Western political ideology seems likely.

Question 2

When social unrest and disorder in a country causes drastic changes in its business environment that adversely affect the profit and other goals of a business enterprise, the business enterprise is said to be facing which of the following type of risk?
A)Political
B)Demographic
C)Ethical
D)Technological
E)Physiological

Accepted Answer

Political risk has been defined as the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a business enterprise. Social unrest typically finds expression in strikes, demonstrations, terrorism, and violent conflict.

Question 3

In the Republic of Lantharia, the state-owned telephone company enjoys a monopoly. The government of Lantharia Republic wants to maximize the operating efficiency of this company by privatizing it. Which of the following is most likely to help the government succeed in this endeavor?
A)Imposing high corporate taxes on the company immediately after its privatization
B)Increasing barriers to foreign direct investment
C)Intervening in the company's operations by exercising price controls
D)Splitting the company into independent units to compete with each other
E)Prohibiting foreign companies from entering into the field of telecommunication in the Republic of Lantharia

Accepted Answer

When Brazil decided to privatize the state-owned telephone monopoly, Telebras Brazil, the government also split the company into four independent units that were to compete with each other and removed barriers to foreign direct investment in telecommunications services. This action ensured that the newly privatized entities would face significant competition and thus would have to improve their operating efficiency to survive.

Question 4

The United Nation of Amberia, a Western European country, fought on the winning side of the Cold War. Which of the following was most likely being propagated by the country by participating in the Cold War?
A)Strong business regulations
B)Communist ideologies
C)Command economies
D)Totalitarian dictatorships
E)Free markets

Accepted Answer

The West won the Cold War, and Western ideology is now widespread. Although command economies remain and totalitarian dictatorships can still be found around the world, the tide has been running in favor of free markets and democracy.

Question 5

Which of the following is an implication of the global changes in political and economic systems for international business?
A)The ideological conflict between collectivism and individualism is less in evidence today.
B)Adoption of Western ideology is declining worldwide.
C)The global tide has been running in favor of command economies and totalitarian dictatorships.
D)Free markets and democracy are being replaced by mixed economies and communist governments.
E)Liberalization and privatization of state-owned enterprises has been losing popularity.

Accepted Answer

The global changes in political and economic systems discussed earlier have several implications for international business. The long-standing ideological conflict between collectivism and individualism that defined the twentieth century is less in evidence today.

Question 6

Star Volans Inc. is planning on expanding its business globally. In terms of the costs involved in conducting business in a country, it will be most economical for the company if it chooses a country:
A)with a closed totalitarian political system.
B)where the company will have to provide its own infrastructure and supporting business.
C)where laws regarding product safety, safety in the workplace, and environmental pollution are extremely stringent.
D)where politicians are held accountable by the electorate.
E)with no local laws to protect intellectual property.

Accepted Answer

With regard to political factors, a company may have to pay off politically powerful entities in a country before the government allows it to do business there. The need to pay what are essentially bribes is greater in closed totalitarian states than in open democratic societies where politicians are held accountable by the electorate.

Question 7

In economic terms, the long-run monetary benefits of doing business in a country are most likely to be a function of the:
A)gender ratio of the country.
B)latitudinal and the longitudinal location of the country.
C)natural resources available in the country.
D)present wealth (purchasing power) of consumers of the country.
E)political history of the country.

Accepted Answer

In the most general sense, the long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers.

Question 8

When Galaxy Ventures, a real estate company, entered the low cost housing business, the market was already saturated with other players. Thus, the company was forced to exit the market due to lack of customer loyalty and substantial dividends. Which of the following is a term used to described the situation faced by the company?
A)First-mover disadvantages
B)Last-mover disadvantages
C)Last-in first-out disadvantages
D)Comparative disadvantages
E)Absolute disadvantages

Accepted Answer

Late-mover disadvantages are the handicaps that late entrants might suffer. In the language of business strategy, early entrants into potential future economic stars may be able to reap substantial first-mover advantages, while late entrants may fall victim to late-mover disadvantages.

Question 9

Although China and India are very large markets when measured by number of consumers, they are relatively small markets when measured in economic terms due to their:
A)orientation toward democracy.
B)small share in the world output.
C)high living standards.
D)limited purchasing power.
E)commitment to a free market system.

Accepted Answer

While some markets are very large when measured by number of consumers (e.g., China and India), low living standards may imply limited purchasing power and therefore a relatively small market when measured in economic terms.

Question 10

The absence of a legal system that protects property rights and the lack of machinery to enforce that system in a market economy usually results in:
A)an improvement in the operating efficiency of newly privatized firms.
B)reduced barriers to foreign direct investment and international trade.
C)an increase in the incentives to engage in economic activity.
D)deregulation and privatization of the economy.
E)the lack of incentive to engage in economic activity.

Accepted Answer

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities, including organized crime, that expropriate the profits generated by the efforts of private-sector entrepreneurs.

Question 11

Which of the following factors in a country is most likely to cause political risk for an international business?
A)The presence of more than one ethnic nationality
B)Infrequent changes in government and government policy
C)Low inflation rate
D)Low level of government debt
E)High living standards

Accepted Answer

Political risk tends to be greater in countries experiencing social unrest and disorder or in countries where the underlying nature of a society increases the likelihood of social unrest. Social unrest typically finds expression in strikes, demonstrations, terrorism, and violent conflict. Such unrest is more likely to be found in countries that contain more than one ethnic nationality.

Question 12

Which of the following statements is most likely to be true about the economic prospects of a country?
A)The economic system and property rights regime are reasonably good predictors of economic prospects of a country.
B)Countries with command economies tend to achieve greater economic growth rates than free market economies.
C)Countries which do not provide any protection for property rights tend to achieve greater economic growth rates than the countries in which property rights are protected.
D)Countries where property rights are not well respected and where corruption is rampant always have very low levels of economic growth.
E)The advantages of building brand loyalty and gaining experience in a country's business practices is greater for a last-mover than for a first-mover.

Accepted Answer

A country's economic system and property rights regime are reasonably good predictors of economic prospects. Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than command economies or economies where property rights are poorly protected.

Question 13

In the context of cost, which of the following can be considered as the most attractive market or investment site?
A)A country that has adopted a closed totalitarian state
B)A country that has a well-developed body of business contract law
C)A country with a command-based economic system
D)A country with stringent product safety laws and huge liability insurance rates
E)A country which does not provide any protection for property rights

Accepted Answer

Local laws that fail to adequately protect intellectual property can lead to the theft of an international business's intellectual property and lost income.

Question 14

The cost of doing business is most likely to be the lowest in:
A)closed totalitarian states.
B)primitive or undeveloped economies.
C)open democratic societies.
D)countries where local laws and regulations set strict standards with regard to product safety, safety in the workplace, and environmental pollution.
E)countries that lack well-established laws for regulating business practice.

Accepted Answer

The need to pay what are essentially bribes is greater in closed totalitarian states than in open democratic societies where politicians are held accountable by the electorate.

Question 15

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption, because of:
A)the shift toward a communist ideology.
B)their high living standards.
C)their large population.
D)their high consumer purchasing power.
E)the shift toward a market-based economic system.

Accepted Answer

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption. In both countries, the shift toward a market-based economic system has produced large gains despite weak property rights and endemic corruption.

Question 16

Countries with which of the following are more likely to attain high and sustained economic growth rates and are thus a more attractive location for international business?
A)Weak protection of property rights
B)Democratic regimes
C)Command-based economic policies
D)Ideologies that differ from Western ideologies
E)Totalitarian dictatorships

Accepted Answer

Countries with democratic regimes, market-based economic policies, and strong protection of property rights are more likely to attain high and sustained economic growth rates and are thus a more attractive location for international business.

Question 17

Capricorn Creative Inc., a U.S.-based advertising firm, was the first in the advertising industry to identify the growth potential of Brazil and to make huge investments in its economy. As a result, the firm was able to build brand loyalty and gain experience in that country's business practices. In the language of business strategy, Capricorn Creative has typically benefited from:
A)a first-mover advantage.
B)forward integration.
C)unrelated differentiation.
D)lateral diversification.
E)technology transfer.

Accepted Answer

By identifying and investing early in a potential future economic star, international firms may build brand loyalty and gain experience in that country's business practices. In the language of business strategy, early entrants into potential future economic stars may be able to reap substantial first-mover advantages, while late entrants may fall victim to late-mover disadvantages.

Question 18

Which of the following of the Cold War era has vanished?
A)Multipolar world
B)Democratic system
C)Free market system
D)Bipolar world
E)Widespread belief in Western ideology

Accepted Answer

The long-standing ideological conflict between collectivism and individualism that defined the twentieth century is less in evidence today. The West won the Cold War, and Western ideology is now widespread. Although the bipolar world of the Cold War era has vanished, it may be replaced by a multipolar world dominated by a number of civilizations.

Question 19

Which of the following statements is true about the global changes in political and economic systems?
A)The West lost the Cold War, and East European communist ideology is now widespread.
B)A lack of deregulation has been the cause for the global financial crisis of 2008-2009, and the recession that followed.
C)It is guaranteed that democracy will thrive in most of the world's newer democratic states.
D)The multipolar world dominated by a number of civilizations of the Cold War era has vanished, and is now being replaced by a bipolar world.
E)Many of the undeveloped and impoverished national markets of eastern Europe, Latin America, Africa, and Asia are potentially enormous for international business.

Accepted Answer

For nearly 50 years, half of the world was off-limits to Western businesses. Now much of that has changed. Many of the national markets of eastern Europe, Latin America, Africa, and Asia may still be undeveloped and impoverished, but they are potentially enormous.

Question 20

Which of the following best exemplifies a first-mover advantage?
A)Venus Inc. has more than 50 percent market share in the telecom industry, because no other company had invested in this industry before Venus Inc.
B)Maya won a cash discount of 75 percent on the latest NewY phone as she was the winner of a competition conducted by NewY.
C)The level of satisfaction Simon experienced when dining at the Emerald Inn was greatest the first time, and thereafter it reduced each time he dined there.
D)Innovative Creations Inc. was the first to exit the declining pager phone manufacturing industry and as a result, it avoided losing a lot of money.
E)Product critiques are extremely respected by major firms, as they are the first ones to review new products and services.

Accepted Answer

First-mover advantages are the advantages that accrue to early entrants into a market. By identifying and investing early in a potential future economic star, international firms may build brand loyalty and gain experience in that country's business practices.

Quiz 3: National Differences in Economic Development

Many commentators have blamed the problems that led to global financial crisis of 2008-2009, and the recession that followed on:

When social unrest and disorder in a country causes drastic changes in its business environment that adversely affect the profit and other goals of a business enterprise, the business enterprise is said to be facing which of the following type of risk?

In the Republic of Lantharia, the state-owned telephone company enjoys a monopoly. The government of Lantharia Republic wants to maximize the operating efficiency of this company by privatizing it. Which of the following is most likely to help the government succeed in this endeavor?

The United Nation of Amberia, a Western European country, fought on the winning side of the Cold War. Which of the following was most likely being propagated by the country by participating in the Cold War?

Which of the following is an implication of the global changes in political and economic systems for international business?

Star Volans Inc. is planning on expanding its business globally. In terms of the costs involved in conducting business in a country, it will be most economical for the company if it chooses a country:

In economic terms, the long-run monetary benefits of doing business in a country are most likely to be a function of the:

Although China and India are very large markets when measured by number of consumers, they are relatively small markets when measured in economic terms due to their:

The absence of a legal system that protects property rights and the lack of machinery to enforce that system in a market economy usually results in:

Which of the following factors in a country is most likely to cause political risk for an international business?

Which of the following statements is most likely to be true about the economic prospects of a country?

In the context of cost, which of the following can be considered as the most attractive market or investment site?

The cost of doing business is most likely to be the lowest in:

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption, because of:

Countries with which of the following are more likely to attain high and sustained economic growth rates and are thus a more attractive location for international business?

Which of the following of the Cold War era has vanished?

Which of the following statements is true about the global changes in political and economic systems?

Which of the following best exemplifies a first-mover advantage?