Global Business Today, 7th Edition: Charles W. L. Hill Test Bank

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Global Business Today, 7th Edition: Charles W. L. Hill Test Bank




Global Business Today, 7th Edition: Charles W. L. Hill Test Bank


Chapter 02

National Differences in Political Economy


True / False Questions

  1. The term political economy is used to stress the fact that the political, economic, and legal systems of a country are interdependent.
    True    False


  1. Largely, political systems that emphasize collectivism tend to be democratic, while political systems that place a high value on individualism tend to be totalitarian.
    True    False


  1. Plato did not equate collectivism with equality.
    True    False


  1. In the early twentieth century, the socialist ideology split into two broad camps: the communists and the capitalists.
    True    False


  1. The social democrats believed that socialism could be achieved only through violent revolution and totalitarian dictatorship.
    True    False


  1. The American Declaration of Independence embodies the ideals of collectivism.
    True    False


  1. One of the tenets of collectivism is that the welfare of society is best served by letting people pursue their own economic self-interest.
    True    False



  1. In practical terms, individualism translates into an advocacy for democratic political systems and free market economics.
    True    False


  1. The United States practices pure democracy.
    True    False


  1. China, Vietnam, Laos, North Korea, and Cuba are no longer totalitarian states.
    True    False


  1. The most common form of theocratic totalitarianism is based on Islam and is exemplified by states such as Iran and Saudi Arabia.
    True    False


  1. Tribal totalitarianism is found in states where political power is monopolized by a party, group, or individual that governs according to religious principles.
    True    False


  1. Right-wing totalitarianism generally permits some individual economic freedom but restricts individual political freedom.
    True    False


  1. The fascist regimes that ruled Germany and Italy in the 1930s and 1940s are examples of theocratic totalitarianism.
    True    False


  1. Most right-wing dictatorships display an affinity towards socialist or communist ideas.
    True    False



  1. In a pure market economy, all productive activities are privately owned, as opposed to being owned by the state.
    True    False


  1. In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all dictated by the interaction of demand and supply.
    True    False


  1. Command economies are dynamic economic systems that encourage innovation.
    True    False


  1. Judges in a common law system have the power to interpret the law so that it applies to the unique circumstances of an individual case.
    True    False


  1. A common law system tends to be less adversarial than a civil law system.
    True    False


  1. Many Muslim countries have legal systems that are a blend of Islamic law and a common or civil law system.
    True    False


  1. Contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out.
    True    False



  1. It is more expensive to draw up contracts in a civil law jurisdiction.
    True    False


  1. Property refers to a resource over which an individual or business holds a legal title.
    True    False


  1. In the context of property rights, public action refers to theft, piracy, blackmail, and the like by private individuals or groups.
    True    False


  1. Public action to violate property rights can be done through legal and illegal mechanisms.
    True    False


  1. Economic evidence suggests that high levels of corruption indirectly have a positive effect on foreign direct investment, level of international trade, and economic growth rate in a country.
    True    False


  1. According to the Foreign Corrupt Practices Act, it is illegal to make grease payments to expedite or secure the performance of a routine governmental action.
    True    False


  1. A copyright grants the inventor of a new product or process exclusive rights to manufacture, use, or sale that invention.
    True    False


  1. Protecting intellectual property has become increasingly problematic.
    True    False



  1. Both civil and criminal product liability laws exist.
    True    False


  1. Gross national income (GNI) measures the total annual income received by residents of a nation.
    True    False


  1. GNI per person figures consider differences in the cost of living and allow for a more direct comparison of living standards in different countries.
    True    False


  1. The Nobel Prize-winning economist Amartya Sen has argued that development should be viewed purely as an economic process and not as a political one.
    True    False


  1. Some totalitarian regimes have fostered a market economy and strong property rights protection and have experienced rapid economic growth.
    True    False


  1. Economic freedom does not necessarily equate with political freedom.
    True    False


  1. Social unrest is less likely to be found in countries that contain more than one ethnic nationality.
    True    False




Multiple Choice Questions

  1. Collectively, we refer to the political, economic, and legal systems as constituting the _____ economy of a country, thus reflecting how these systems are interdependent.
    A. domestic
    B. civic
    C. administrative
    D. political


  1. The system of government in a nation is referred to as its:
    A. common system.
    B. political system.
    C. domiciliary system.
    D. legal system.


  1. Political systems can be assessed according to the degree to which they emphasize_____ and the degree to which they are _____.
    A. equal opportunity and adult franchise; open to free trade versus protectionism
    B. democratic versus individualistic; market oriented as opposed to being production oriented
    C. capitalism over socialism; collectivist or individualistic
    D. collectivism as opposed to individualism; democratic or totalitarian


  1. When _____ is practiced in a society, the needs of society as a whole are generally viewed as being more important than individual freedoms.
    A. totalitarianism
    B. collectivism
    C. individualism
    D. capitalism



  1. In some cultures it is considered appropriate to give precedence to the common good over what may benefit individuals. These cultures can be termed _____.
    A. individualist
    B. totalitarian
    C. collectivist
    D. absolutist


  1. _____ is a political philosophy that advocates substantial public involvement through government ownership, in the means of production and distribution.
    A. Socialism
    B. Capitalism
    C. Individualism
    D. Fascism


  1. Modern socialism traces its intellectual roots to:
    A. Aristotle.
    B. David Hume.
    C. Karl Marx.
    D. Adam Smith.


  1. According to Karl Marx, what is the relationship shared by capitalists and workers in a capitalist society?
    A. Workers have as much opportunity to advance themselves socially as the capitalist owners.
    B. Workers and capitalists are both responsible for improving the economic conditions of the society.
    C. Capitalists discriminate amongst workers on the basis of religion and education.
    D. Capitalists expropriate for their own use the value created by workers, while paying workers only subsistence wages in return.



  1. In the early twentieth century, the socialist ideology split into two broad camps. The group that believed socialism could be achieved only through violent revolution and totalitarian dictatorship was referred to as:
    A. communists.
    B. fascists.
    C. political democrats.
    D. social democrats.


  1. The socialist who committed themselves to achieving socialism through democratic means was referred to as:
    A. communists.
    B. social democrats.
    C. individualists.
    D. pure democrats.


  1. The communist version of socialism reached its high point in:
    A. the 1950s.
    B. the late 1970s.
    C. the period immediately following World War II.
    D. the mid-1990s.


  1. Which of the following is a country that has been strongly influenced by social democracy?
    A. Cuba
    B. North Korea
    C. China


  1. The sale of state-owned enterprises to private investors is referred to as:
    A. privatization.
    B. revitalization.
    C. democratization.
    D. participation.



  1. Which of the following can be traced to the ancient Greek philosopher, Aristotle?
    A. Collectivism
    B. Individualism
    C. Socialism
    D. Totalitarianism


  1. _____ stresses that the interests of the individual should take precedence over the interests of the state.
    A. Totalitarianism
    B. Socialism
    C. Individualism
    D. Humanism


  1. Which of the following individuals argued that private property is more highly productive than communal property and will thus stimulate progress?
    A. Aristotle
    B. Socrates
    C. Plato
    D. Karl Marx


  1. Which of the following is NOT a central tenet of individualism?
    A. Guaranteeing individual freedoms.
    B. The government dictates what is in the societys best interest.
    C. Guaranteeing self-expression.
    D. Allowing people to pursue their own economic self-interest.


  1. The pro-business and pro-free trade values of _____ create a favorable environment within which international businesses can thrive.
    A. collectivism
    B. socialism
    C. individualism
    D. communism



  1. Which of the following is the political system in which government is by the people, exercised either directly or through elected representatives?
    A. Despotism
    B. Democracy
    C. Totalitarianism
    D. Collectivism


  1. Democracy, in its purest form, is based on the belief that:
    A. citizens should be directly involved in decision making.
    B. citizens are ill-equipped to make their own decisions and should be governed by a few.
    C. citizens are responsible for their own economic health and thus need no government.
    D. education of citizens is the most important resource of societies.


  1. _____ is a form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited.
    A. Capitalism
    B. Totalitarianism
    C. Democracy
    D. Collectivism


  1. An individuals right to freedom of expression and organization, a free media, and regular elections are the building blocks of what type of political system?
    A. Communism
    B. Representative democracy
    C. Nominative democracy
    D. Capitalism


  1. To guarantee that elected representatives can be held accountable for their actions by the electorate, an ideal representative democracy has a number of safeguards. Which of the following is NOT an example of a safeguard in an ideal representative democracy?
    A. A fair court system that is independent from the political system
    B. Universal adult suffrage
    C. An individuals right to freedom of expression, opinion, and organization
    D. Unlimited terms for elected representatives



  1. In a totalitarian country:
    A. free and fair elections are denied to the citizens.
    B. the media is usually free and very active.
    C. an individual has basic civil rights.
    D. the right to freedom of expression and organization is usually not curbed.


  1. _____ is a form of totalitarianism that advocates achieving socialism through totalitarian dictatorship.
    A. Tribal totalitarianism
    B. Democratic totalitarianism
    C. Communist totalitarianism
    D. Collective totalitarianism


  1. A political system in which political power is monopolized by a party, group or individual that governs according to religious principles is referred to as:
    A. theocratic totalitarianism.
    B. communist totalitarianism.
    C. right-wing totalitarianism.
    D. tribal totalitarianism.


  1. A totalitarian political system in which a party, group, or individual that represents the interests of a particular ethnic group monopolizes political power is referred to as:
    A. theocratic totalitarianism.
    B. communist totalitarianism.
    C. right-wing totalitarianism.
    D. tribal totalitarianism.


  1. _____ totalitarianism generally permits individual economic freedom, but restricts individual political freedom on the grounds that it would lead to the rise of communism.
    A. Theocratic
    B. Right-wing
    C. Capitalist
    D. Tribal



  1. The fascist regimes that ruled Germany and Italy in the 1930s and 1940s were states.
    A. right-wing totalitarian
    B. theocratic totalitarian
    C. communist
    D. democratic


  1. In which countries are we likely to find free market economies?
    A. Countries where the good of the society has precedence over individual rights
    B. Countries where individual goals are given primacy over collective goals
    C. Countries where the state has taken control over many enterprises
    D. Countries where property laws are weak


  1. A _____ economy is an economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced.
    A. mixed
    B. command
    C. market
    D. trade


  1. Which of the following is an advantage of private ownership?
    A. It protects businesses from volatile economic conditions.
    B. It helps businesses take advantage of state subsidies.
    C. It eliminates competitors and reduces pressure to lower production costs.
    D. It gives entrepreneurs an incentive to search for better ways of serving consumer needs.


  1. In a pure _____ economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold.
    A. command
    B. market
    C. trade
    D. civic



  1. In comparison to market-based economies, _____ and _____ are absent from command economies.
    A. price-control; monopoly
    B. dynamism; innovation
    C. complacence; regulation
    D. state control; corruption


  1. In a _____ economy, certain sectors of the economy are left to private ownership and free market mechanisms, while in other sectors there is significant state ownership and government planning.
    A. command
    B. combined
    C. mixed
    D. civic


  1. In mixed economies, governments sometimes tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests. This process is called:
    A. privatization.
    B. revitalization.
    C. unemployment management.
    D. nationalization.


  1. Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprise, whereas the laws enacted by governments in democratic states where individualism is the dominant political philosophy tend to be pro-private enterprise and pro-consumer. This indicates how:
    A. the economic system of a country can be undermined by its legal system.
    B. the legal system of a country is influenced by the prevailing political system.
    C. the political system of a country is insulated from its legal system.
    D. the legal system of a country can shape its economic system.



  1. The _____ of a country refers to the rules that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained.
    A. political system
    B. administrative system
    C. economic system
    D. legal system


  1. Identify the legal system that is based on tradition, precedent, and custom.
    A. Common law
    B. Civil law
    C. Theocratic law
    D. Monarchy law


  1. In the context of common law, the ways in which laws are applied in specific situations are referred to as:
    A. tradition.
    B. precedent.
    C. custom.
    D. parallel.


  1. In the context of common law, tradition refers to:
    A. the religious aspect in the law.
    B. the ways in which laws are applied in specific situations.
    C. the cases that have come before the courts in the past.
    D. a countrys legal history.


  1. The common law system enjoys a degree of flexibility not found in other systems because:
    A. the common law system is usually found in democratic republics.
    B. the common law system originated from Great Britain and can be found in almost all of its former colonies.
    C. the law courts can interpret common law with regard to tradition, precedent, and custom.
    D. the common law system is based on codified laws that encompass a wide spectrum of cases.



  1. A _____ law system is based on a detailed set of laws organized into codes.
    A. civil
    B. theocratic
    C. common
    D. traditional


  1. A legal system that is based primarily on religious teachings is referred to as a:
    A. civil law system.
    B. theocratic law system.
    C. common law system.
    D. traditional law system.


  1. The most widely practiced theocratic legal system in the modern world is:
    A. Christian law.
    B. Islamic law.
    C. Jewish law.
    D. Hindu law.


  1. The parties to an agreement normally resort to _____ when one party feels the other has violated either the letter or the spirit of an agreement.
    A. property law
    B. public action
    C. private action
    D. contract law


  1. A _____ is a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.
    A. manuscript
    B. manifesto
    C. contract
    D. treatise



  1. Contracts drafted under a common law framework tend to be_____, while those drafted under civil law tend to be _____.
    A. very detailed; less specific
    B. very short; much more detailed
    C. inflexible; more open to interpretation
    D. inexpensive to draft; more adversarial


  1. When contract disputes arise in international trade, there is always the question of which countrys laws to apply. To resolve this issue, a number of countries, including the United States, have ratified the _____, which establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations.
    A. United Nations Convention on Contracts for the International Sale of Goods
    B. Foreign Practices Act
    C. Convention on Combating Bribery of Foreign Public Officials
    D. International Court of Mediation


  1. When firms do not wish to accept the rules of the CIGS, they usually rely on _____ to settle contract disputes.
    A. UN involvement
    B. arbitration
    C. local codes
    D.U.S. law


  1. The bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource are called _____ rights.
    A. resource
    B. asset
    C. taxable
    D. property



  1. Theft, piracy, or blackmail by private individuals or groups violating property rights is referred to as:
    A. extortion.
    B. individual action.
    C. public action.
    D. private action.


  1. After the collapse of communism in Russia, successful business owners often had to pay protection money to the Mafia or face violent retribution. This is an example of:
    A. rights corruption.
    B. public action.
    C. private action.
    D. property corruption.


  1. When government officials such as politicians and bureaucrats extort income or resources from property holders, this can be described as a:
    A. patents violation.
    B. public action.
    C. warrants action.
    D. private action.


  1. According to Transparency International, which country is the most corrupt?
    A. New Zealand
    B. Finland
    C. Somalia


  1. Economic evidence suggests that high levels of corruption _____ the foreign direct investment, level of international trade, and economic growth rate in a country.
    A. can indirectly increase
    B. can significantly reduce
    C. seldom affects
    D. is not a factor in



  1. In the United States, the Foreign Corrupt Practices Act was passed during the 1970s following revelations:
    A. from the Watergate scandal.
    B. that foreign companies had bribed U.S. government officials in an attempt to win lucrative contracts.
    C. that U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts.
    D. that U.S. companies were involved in bribing U.S. government officials in cases related to tax evasion.


  1. Which of the following does the U.S. law and OECD convention allow as an exception?
    A. Bribing a foreign government official
    B. Failure to keep records that would reveal if a violation of the act has occurred
    C. Grease payments or speed money
    D. Suppressing records that would indicate whether a breach of the act has taken place


  1. Products of the mind, such as computer software, a screenplay, a music score, or the chemical formula for a new drug, constitute:
    A. assets which receive no protection under law.
    B. intangible assets.
    C. non-property assets.
    D. intellectual property.


  1. Venus Corporation has developed a new type of adhesive tape. Which type of legal protection can grant the company exclusive rights for a defined period to the manufacture, use, or sale of that invention?
    A. Warrant
    B. Patent
    C. Copyright
    D. Trademark



  1. A composer is able to protect an original musical score from being copied and sold by someone else by acquiring a _____ for the score.
    A. patent
    B. warrant
    C. trademark
    D. copyright


  1. As a result of _____ protection, the Nike Swoosh logo is protected from being used by any other shoe manufacturer.
    A. trademark
    B. copyright
    C. patent
    D. warrant


  1. Patents, copyrights, and trademarks establish ownership rights over _____ property.
    A. intellectual
    B. non-economic
    C. financial
    D. creative


  1. According to Business Software Alliance, which region had the highest piracy rates for computer software in 2008?
    A. Southeast Asia
    B. North America
    C. Central and Eastern Europe
    D. South America


  1. The regulations imposed under the _________ agreement, oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.
    A. TTPI
    B. TRIPS
    C. TAFTA
    D. TPP



  1. _____ laws hold a firm and its officers responsible when a product causes injury, death, or damage.
    A. Product violation
    B. Product safety
    C. Product liability
    D. Contract liability


  1. Which country has the most extensive civil and criminal liability laws?
    A. Australia
    B. India
    C. USA


  1. A boom in product liability suits and awards in the United States resulted in a dramatic increase in the cost of liability insurance. Many business executives argue that this:
    A. makes American businesses less competitive in the global marketplace.
    B. offers American businesses protection from foreign competitors.
    C. raises ethical issues in doing business in the country.
    D. makes it cheaper to do business in the country.


  1. _____ is regarded as a yardstick for the economic activity of a country, and it measures the total annual income received by residents of a nation.
    A. HDI
    B. GDP
    C. GPI
    D. GNI


  1. Which of the following is an adjustment in gross domestic product per capita to reflect differences in the cost of living?
    A. PPP
    B. GNI
    C. GNP
    D. NNP



  1. The base for adjustment of purchasing power parity is the cost of living in:
    A. China.
    B. Great Britain.
    C. Australia.
    D. the United States.


  1. Which of the following countries achieved the highest GDP growth rate between 1999 and 2008?
    A. Germany
    B. The United States
    C. China


  1. The Gross National Income (GNI) and Purchasing Power Parity (PPP) of a nation are static indicators of economic development. Which of the following statements best support the above claim?
    A. They are too statistical in approach and lack human perception.
    B. They are ill-defined and can be easily confused with other indicators of economic development.
    C. They tell us if a country is poorer than another, and do not indicate the changing economic dynamics between the two.
    D. They are dependent on factors like geography, natural resources, and population and thereby inconsistent.


  1. Economist Amartya Sen emphasizes on basic healthcare and basic education as important factors of economic development. Which of the following statements best substantiate his argument?
    A. Healthcare and education are the fastest growing sectors and it is prudent to concentrate resources on these sectors.
    B. Multinational firms stipulate healthcare and education as key criteria for investment in foreign markets.
    C. People cannot develop their capabilities if they are chronically ill or woefully ignorant.
    D. Healthcare and education are key factors in attracting foreign direct investment in local markets.



  1. The United Nations Human Development index is based on_____, literacy rates, and whether average incomes are sufficient to meet the basic needs of life in a country.
    A. life expectancy at birth
    B. maternal mortality rates
    C. health insurance coverage rates
    D. sex-ratio


  1. _____ and _____ can be considered as the engines of long-run economic growth.
    A. Regulation; universal education
    B. Regulation; democracy
    C. Innovation; entrepreneurial activity
    D. Capital; subsidies


  1. The economic freedom associated with a _____ economy creates greater incentives for innovation.
    A. planned
    B. market
    C. socialist
    D. protected


  1. Which of the following is an advantage of a market economy?
    A. Any individual who has an innovative idea is free to try to make money out of that idea by starting a business.
    B. The state owns all means of production.
    C. Commercialization of innovative products is prevented.
    D. It is the state, rather than the individual, that captures most of the gains.


  1. A study found that the more _____ a country had between 1975 and 1995, the more economic growth it achieved and the richer its citizens became.
    A. protectionism
    B. economic freedom
    C. economic regulation
    D. trade tariffs



  1. Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until:
    A. property rights are better defined and protected.
    B. the basic tenets of communism are also accommodated.
    C. domestic markets are better protected.
    D. intellectual property rights are scrapped.


  1. Five of the fastest-growing economies of the past 30 yearsChina, South Korea, Taiwan, Singapore, and Hong Konghad one thing in common at the start of their economic growth:
    A. undemocratic governments.
    B. Communist regimes.
    C. colonial masters.
    D. universal suffrage.


  1. A representative democracy is not an essential factor for economic development and totalitarian governments have displayed that it is possible to attain high rates of economic growth. Which of the following countries best illustrates the above argument?
    A. North Korea
    B. China
    C. India


  1. According to economist Jeffrey Sachs, which type of nation-state based on geography, is most likely to support market institutions?
    A. Coastal state
    B. States in the Western hemisphere
    C. States in the Northern hemisphere
    D. Tropical state



  1. Since the late 1980s, which of the following trends has emerged in the political economies of many of the worlds nation-states?
    A. A wave of communist revolutions has swept the world.
    B. Capitalist ideology has been in retreat.
    C. A wave of democratic revolutions has swept the world.
    D. A strong move toward centrally planned and mixed economies has been in evidence.


  1. According to Freedom House _____ of the worlds nations can be classified as free in 2009.
    A. about 89 percent
    B. most
    C. less than half
    D. less than 20 percent


  1. Which of these is a characteristic of a partly free country?
    A. Citizens enjoy a high degree of political freedom, but economic freedom is denied.
    B. A few restrictions on political rights and civil liberties of citizens exist.
    C. The country is foreign-ruled but its citizens have control over local politics.
    D. The country is independent economically, but recognizes a foreign power as its sovereign ruler.


  1. Which of the following is one of the reasons for the spread of democracy in the world?
    A. Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.
    B. The rise of dominant nuclear powers.
    C. The failure of post-communist countries to achieve economic growth.
    D. In many countries, the economic downturn of the past quarter century have led to the decline of prosperous middle and working classes.



  1. New information and communication technologies like the Internet have reduced the states ability to control access to uncensored information. Which of the following is one of the possible political fallouts of this development?
    A. It has undermined democratic ideology.
    B. It has prevented democratic ideals from entering closed societies.
    C. Internet-based businesses are under risk in Communist countries.
    D. It has been a factor in the spread of democracy in the modern world.


  1. Which of the following theories was propounded by Fukuyama?
    A. The future is a world dominated by a universal civilization characterized by democratic regimes and free market capitalism.
    B. While many societies may be modernizing, they are not becoming more free.
    C. Modernization in non-Western societies can result in a retreat toward the traditional.
    D. The world will witness a clash of civilizations, each of which has its own value systems and ideology.


  1. The rationale behind the economic transformation around the world is:
    A. the failure of capitalism to adequately protect countries from financial downturns.
    B. the failure of globalization and free-trade to insulate economies from recessions in other countries.
    C. the failure of command and mixed economies to match the economic development in market-based economies.
    D. the economic success mixed economies have enjoyed that command and market economies have failed to achieve.


  1. Which of the following is the worlds freest economy according to the 2009 Heritage Foundation index?
    A. Hong Kong
    B. Japan
    C. France



  1. The two top states in the 2009 Heritage Foundation index of the freest economies in the world, Hong Kong and Singapore, cannot be classified as politically free. This indicates that:
    A. lack of political freedom is a prerequisite for economic freedom.
    B. economic freedom does not necessarily equate with political freedom.
    C. the nations lower on the list should adopt more politically restrictive policies.
    D. political freedom is detrimental to economic freedom.


  1. Which of the following involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate?
    A. Privatization
    B. Disinvestment
    C. Deregulation
    D. Subsidization


  1. Which of the following can be a step involved in the deregulation of an economy?
    A. Imposing price controls, rendering prices free of the influence of demand and supply.
    B. Relaxing or removing restrictions on direct investment by foreign enterprises and international trade.
    C. Offering government bail-outs to private companies in financial trouble.
    D. Nationalizing private companies that are vital to national interest.


  1. How does privatization help stimulate gains in economic efficiency?
    A. By providing subsidies to newly privatized firms to shield them from outside competition and by raising barriers to FDI.
    B. By giving new private owners the reward of profits for searching for increases in productivity, entering new markets, and exiting losing ones.
    C. By allowing newly privatized firms monopoly over a particular industry.
    D. By encouraging the practice of state-controlled price regulation.


  1. Which of the following is a way to make privatization work?
    A. By allowing newly privatized firms monopoly over a particular industry
    B. By continuing to give subsidies to newly privatized firms
    C. By protecting it from foreign competition in the form of barriers to international trade and investment
    D. By general deregulation and opening of the economy



  1. The absence of a legal system that protects property rights and the machinery to enforce that system usually results in:
    A. the raising of barriers to foreign direct investment and international trade.
    B. a collectivist approach to business and commerce.
    C. a reduction in the incentive to engage in productive economic activity.
    D. deregulation and privatization of the economy.


  1. The advantages that accrue to early entrants into a market are referred to as:
    A. early bird advantages.
    B. first-mover advantages.
    C. prime-mover advantages.
    D. first-entrant advantages.


  1. Handicaps suffered by late entrants into a market are referred to as:
    A. late-mover disadvantages.
    B. last-class disadvantages.
    C. standard-class disadvantages.
    D. prime-mover disadvantages.


  1. Your company has business interests in a country where the President-elect has won on a platform of a return to socialism and protectionism. Consequently, you are concerned about the _____ risks of continuing to do business in that country.
    A. ethical
    B. fiscal
    C. political
    D. operational


  1. _____ is the likelihood that economic mismanagement will cause drastic changes in a countrys business environment that will adversely affect the profit and other goals of a business enterprise.
    A. Industrial risk
    B. Political risk
    C. Operational risk
    D. Economic risk



  1. The likelihood that a trading partner will opportunistically break a contract or expropriate property rights is called:
    A. political risk.
    B. economic risk.
    C. ethical risk.
    D. legal risk.



Essay Questions

  1. How has the ideological conflict between collectivism and individualism shaped recent world history? Also, discuss the direction this conflict might take in the future.





  1. Describe in brief the different forms of totalitarianism?





  1. Briefly describe the three broad types of economic systems.






  1. How do common law and civil law systems differ in their approaches to contract law?





  1. Describe the two ways in which property rights can be violated.





  1. What is intellectual property? What are the different means by which ownership rights can be established over intellectual property?





  1. What are the possible courses of action that international businesses can take to counter violations of their intellectual property rights?






  1. Describe briefly the broader conceptions of development put forth by the economist Amartya Sen.





  1. Why are innovation and entrepreneurial activity identified as the engines of long-run economic growth?





  1. Five of the fastest-growing economies of the past 30 yearsChina, South Korea, Taiwan, Singapore, and Hong Konghad one thing in common at the start of their economic growth: undemocratic governments. Thus, it can be concluded that totalitarian governments are better for a functioning market economy than are democratic governments. Do you agree with this statement? Why or why not?





  1. The political economy of many of the worlds nation-states has changed radically since the late 1980s. Identify the two trends that have emerged during this time.






  1. Briefly describe the three main reasons for the spread of democracy across the world.





  1. What is deregulation? Explain its role in privatization.





  1. What are the various types of risk that a business could face in doing business in a particular country?





  1. Alpha Incorporated has sought your opinion about the overall attractiveness of various countries as potential markets and investment sites. What would you tell them?

Chapter 04

Ethics in International Business


True / False Questions

  1. The course of action that a business opts to take and which does not violate accepted principles or business ethics is known as an ethical strategy.
    True    False


  1. In international business, a course of action that is legal is invariably also ethical.
    True    False


  1. Rights that are taken for granted in developed countries, such as freedom of speech, find universal acceptance.
    True    False


  1. One of the conditions necessary for General Motors to abide by, as indicated within the Sullivan principles, was that the company should not obey the apartheid laws in its own South African operations.
    True    False


  1. Ten years after he proposed the Sullivan principles, Leon Sullivan concluded that simply following the principles was sufficient to break down the apartheid regime and that any American company, adhering to his principles, could ethically justify a continued presence in South Africa.
    True    False


  1. Myanmar and Nigeria are examples of countries where inward investment by a multinational proved to be a force for economic, political, and social progress that ultimately improved the rights of people in repressive regimes and ushered in democracy.
    True    False



  1. Royal Dutch Shell has been repeatedly criticized for contributing to human rights violations in Nigeria.
    True    False


  1. Investment in China is frequently justified on the grounds that although Chinas human rights record is often questioned by human rights groups, and although the country is not a democracy, continuing inward investment will help boost economic growth, raise living standards, and usher in political change.
    True    False


  1. Environmental pollution regulations are usually much more stringent in developing countries than in rich industrialized nations.
    True    False


  1. The tragedy of commons occurs when a resource owned by a developing country is overused by multinational corporations, resulting in its degradation.
    True    False


  1. No one owns the atmosphere or the oceans, so no one is harmed if these are polluted.
    True    False


  1. The tragedy of commons phenomenon was first named by Garrett Hardin.
    True    False


  1. Carbon dioxide emission regulations for industries have been standardized across the globe.
    True    False



  1. Corruption has been a problem in almost every society in history, with the exception of Western nations.
    True    False


  1. Evidence indicates that the Foreign Corrupt Practices Act of the United States put U.S. firms at a substantial competitive disadvantage.
    True    False


  1. The Lockheed casewhere the company made payments to Japanese officials and agents to secure a large contract from Nippon Air-was the impetus for the 1977 passage of the Foreign Corrupt Practices Act in the United States.
    True    False


  1. Both Foreign Corrupt Practices Act of the United States and OECDs Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, allow for facilitating payments.
    True    False


  1. Evidence clearly indicates that, in the context of pervasive and cumbersome regulations in developing countries, corruption substantially improves efficiency and helps economic growth.
    True    False


  1. The concept of social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions.
    True    False


  1. Noblesse oblige is a Latin term that refers to the social convention that, persons of high and noble birth must be obliged through preferential treatment and gift-giving.
    True    False



  1. Power is morally neutralit is neither good nor bad.
    True    False


  1. The ethical obligations of a multinational corporation toward employment conditions, human rights, and corruption are always clear-cut since accepted ethical principles about these fundamental issues are universal.
    True    False


  1. Situations in which none of the available alternatives seems ethically acceptable present an ethical dilemma.
    True    False


  1. All managers need a moral compass to guide them through ethical dilemmas.
    True    False


  1. Business ethics are divorced from the personal ethics of the individuals conducting business.
    True    False


  1. Expatriate managers of multinational firms have less than the usual degree of pressure to violate their personal ethics.
    True    False


  1. Managers can best make ethical decisions by applying a straightforward business calculus to what they perceive to be a business decision.
    True    False



  1. An organizational culture can legitimize behavior that society would judge as unethical, particularly when this is mixed with a focus on unrealistic performance goals.
    True    False


  1. Straw men approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer appropriate guidelines for ethical decision making in a multinational enterprise.
    True    False


  1. In his doctrine of business ethics, Milton Friedman explicitly argues against ethical behavior by firms.
    True    False


  1. The ethics philosophy of naive immoralism demonstrates moral imperialism and a lack of cultural sensitivity.
    True    False


  1. Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others.
    True    False


  1. According to rights theories, the collective good must always take precedence over fundamental rights of citizens.
    True    False


  1. Under Rawlss veil of ignorance, everyone is imagined to be ignorant of all of his or her particular characteristics.
    True    False



  1. Building an organization culture that places a high value on ethical behavior requires incentive and reward systems.
    True    False


  1. Companies can strengthen the moral courage of employees by committing themselves to not retaliate against employees who exercise moral courage.
    True    False



Multiple Choice Questions

  1. A strategy, or course of action, that does not violate the accepted principles of right or wrong governing the conduct of businesspeople is a(n):
    A. ethical strategy.
    B. operational strategy.
    C. functional strategy.
    D. humanistic strategy.


  1. According to the text, in the international business setting, the most common ethical issues involve human rights, environmental regulations, corruption, the moral obligation of multinational corporations, and _____.
    A. border control
    B. employment practices
    C. foreign exchange regulations
    D. economic aid


  1. Fashionista Apparels ensures that its subcontractors in South America engage in good _____ by paying their workers well and keeping to 8-hour workdays.
    A. environmental practices
    B. financial practices
    C. employment practices
    D. trade practices



  1. When work conditions in a host nation are clearly inferior to those in a multinational companys home nation, what standards should be applied?
    A. Those of the home nation
    B. Global standards
    C. Minimal acceptable standards
    D. The highest possible standards


  1. Perrault Machines and Tools, an American multinational company, is looking for suppliers in Asia. It is, however, concerned about the working conditions in factories around the region. Which of the following is a good way for the company to guard against ethical abuses at its suppliers facilities?
    A. Pay the suppliers well above local rates.
    B. Accept the working conditions practiced in the host nation.
    C. Require that the supplier conforms to the legal standards of the host country.
    D. Audit the foreign suppliers on a regular basis.


  1. The Sullivan principles were formulated in response to:
    A. human rights violations in the Honduras.
    B. the apartheid system in South Africa.
    C. the sweat shops in China.
    D. military dictatorship in Myanmar.


  1. Which of the following was the first company to adopt Sullivans principles for its activities in South Africa?
    A. General Electric
    B. General Mills
    C. General Motors
    D. General Insurance



  1. Ten years after he proposed what came to be known as Sullivans principles, Leon Sullivan concluded that:
    A. following the principles was the most ethical way of addressing the ethical concerns in doing business in South Africa.
    B. even following the principles would not ethically justify continuing to do business in South Africa.
    C. a new set of principles was needed to allow companies to ethically continue their business in South Africa.
    D. the principles had been successful in combating apartheid in South Africa.


  1. Myanmar and Nigeria have been cited in the text as examples of countries where:
    A. sanctions have been instrumental in toppling repressive regimes.
    B. democracy has been ushered in as a result of economic growth.
    C. the economy has grown as a result of foreign investment.
    D. investment cannot be justified on ethical grounds.


  1. Which foreign company in Nigeria has been repeatedly criticized for its alleged contribution to human rights violations in the country?
    A. Royal Dutch Shell
    B. Nike
    C. British Petroleum
    D. Banana Republic


  1. The atmosphere and oceans can be viewed as a _____ from which everyone benefits but for which no one is specifically responsible.
    A. preserve of developed nations
    B. global commons
    C. responsibility of developing nations
    D. global liability



  1. _____ occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation.
    A. Murphys law
    B. Pareto efficiency
    C. The tragedy of the commons
    D. A deadweight loss


  1. Who first named the phenomenon that is known as the tragedy of the commons?
    A. Alfred Chandler
    B. Garrett Hardin
    C. Leon Sullivan
    D. Henry Gleason


  1. In the modern world, corporations can contribute to the global tragedy of the commons by:
    A. moving production to locations where they are free to pump pollutants into the environment.
    B. imposing restrictive pollution regulations on developing countries, thus further crippling their economies.
    C. strengthening pollution regulations in developing countries to bring them at par with their Western counterparts.
    D. moving production out of locations where there are lax environmental regulations and inadequate enforcement of the same.


  1. Most climate scientists argue that human industrial and commercial activity is increasing the amount of carbon dioxide in the atmosphere, leading to:
    A. an abundance of mineral deposits in the soil.
    B. lax emission laws.
    C. global warming.
    D. meta-cooling.



  1. The well-publicized Lockheed incident of the 1970s is an example of _____ in international business.
    A. human rights violations
    B. corruption
    C. environmental hazards
    D. product safety violations


  1. The Lockheed case was the impetus for the 1977 passage of the _____ in the United States, which outlawed the paying of bribes to foreign government officials to gain business.
    A. International Anticorruption and Good Governance Act
    B. International Emergency Economic Powers Act
    C. Foreign Corrupt Practices Act
    D. Ethics in Government Act


  1. The Foreign Corrupt Practices Act was subsequently amended to allow for speed money or grease payments, which are:
    A. payments to secure contracts that would not otherwise be secured.
    B. payments to obtain exclusive preferential treatment.
    C. payments to influence officials in the companys favor.
    D. payments to ensure receiving the standard treatment that a business ought to receive.


  1. In 1997, the trade and finance ministers from the member states of the Organization for Economic Cooperation and Development (OECD) adopted the _____, which obliges member states and other signatories to make the bribery of foreign public officials a criminal offense.
    A. Foreign Corrupt Practices Act
    B. International Anticorruption and Good Governance Act
    C. Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
    D. Prevention of Corruption in International Business Negotiations and Transactions Act



  1. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions:
    A. condones bribery of foreign public officials to secure contracts.
    B. excludes facilitating payments made to expedite routine government action.
    C. excludes bribery that does not result in human rights violations.
    D. makes payment of speed money illegal.


  1. Which of the following statements would be an argument that supports the U.S. Congress exemption of facilitating payments from the Foreign Corrupt Practices Act?
    A. Corruption reduces the returns on business investment and leads to low economic growth in most developing countries.
    B. Unproductive bureaucrats may siphon off the profits from a business activity.
    C. Corruption had a significant negative impact on a countrys growth rate.
    D. In the context of pervasive and cumbersome regulations in developing countries, corruption may improve efficiency and help growth.


  1. Which of the following arguments strengthens the ethical case for never engaging in corruption, no matter how compelling the benefits might seem?
    A. There are cases where side payments to government officials can remove the bureaucratic barriers to investments that create jobs.
    B. Corruption tends to corrupt both the bribe giver and the bribe taker.
    C. In the context of pervasive and cumbersome regulations in developing countries, corruption may improve efficiency and help growth.
    D. Giving bribes might be the price that must be paid to do a greater good.


  1. The concept of _____ refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences.
    A. corporate governance
    B. class consciousness
    C. affirmative action
    D. social responsibility



  1. In a business setting, the term noblesse oblige is taken to mean:
    A. benevolent behavior that is the responsibility of successful enterprises.
    B. obliging an official with the expectation of a reciprocal favor.
    C. rich corporations abusing their power for private gain.
    D. the preferential treatment received by successful companies from governments.


  1. All of the following are truths about power EXCEPT that:
    A. it is morally neutral.
    B. it always decreases social welfare.
    C. how it is used matters.
    D. it can be used in positive ways.

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