Chapter 3 T/F

A market with a large number of consumers, with low living standards will have a relatively large market when measured in economic terms.

FALSE

Countries with free market economies in which property rights are protected tend to achieve lower economic growth rates than command economies where property rights are poorly protected.

FALSE

Deregulation involves prohibiting private enterprises from operating in most sectors of the economy.

FALSE

Economic freedom necessarily equates with political freedom.

FALSE

Economic risks are independent of political risk.

FALSE

GNI allows a more direct comparison of living standards in different countries.

FALSE

GNI and PPP data are useful because they provide a dynamic analysis of economic development

FALSE

Gross national income per-capita data take into account differences in the cost of living.

FALSE

In Sen's view, development is an economic process that should be assessed by material output measures such as GNI per capita.

FALSE

In a command economy, the prices are determined by the free interplay of demand and supply.

FALSE

In a planned economy, the means of production are owned by private individuals.

FALSE

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s.

FALSE

Most property in poor countries is owned legally by investors.

FALSE

One visible indicator of political risks tends to be a country's inflation rate.

FALSE

Political freedom is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

FALSE

Political scientist Samuel Huntington predicts that there will be a more harmonious world dominated by a universal civilization characterized by democratic regimes and free market capitalism.

FALSE

Privatization reduces the incentive of business owners to increase productivity, enter new markets, and to exit losing ones.

FALSE

Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises.

FALSE

Since the late 1980s, there has been a strong move away from a more free market economic model and toward a more centrally planned and mixed economies.

FALSE

The government of a country takes over the airport security industries following a major terrorist attack, to improve airport security. This is an example of privatization.

FALSE

Totalitarian states promote human freedom and human development, which facilitates economic progress.

FALSE

A country's economic system and property rights regime are reasonably good predictors of economic prospects.

TRUE

A well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement.

TRUE

According to political scientist Samuel Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.

TRUE

Anecdotal comparisons suggest that the assertion that nations that invest more in education will have higher growth rates is true.

TRUE

By identifying and investing early in a potential future economic star, international firms can build brand loyalty and gain experience in that country's business practices.

TRUE

Democracy is one of the consequences of economic growth and progress.

TRUE

First-mover advantages are the advantages that accrue to early entrants into a market.

TRUE

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.

TRUE

GNI per capita can be adjusted by purchasing power to account for differences in the cost of living.

TRUE

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to innovations and entrepreneurial activity.

TRUE

In mixed economies, in certain sectors the state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, and restricted international trade.

TRUE

It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

TRUE

Life expectancy at birth is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

TRUE

New information and communication technologies have enabled the spread of democratic ideals.

TRUE

One of the reasons for the spread of democracy is the emergence of increasingly prosperous middle and working classes who have pushed for democratic reforms.

TRUE

Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation, and entrepreneurial activity in developing nations.

TRUE

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

TRUE

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition.

TRUE

The base for the purchasing power parity adjustment of the GNI is the cost of living in the United States.

TRUE

The economic freedom associated with a market economy creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy.

TRUE

The long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth of consumers in that market, and the likely future wealth of consumers.

TRUE

The overall attractiveness of a country as a potential market or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

TRUE

The state can expropriate the profits from innovation through legal means.

TRUE

Transformation from centrally planned command economies to market-based economies can be attributed to the fact that command and mixed economies failed to deliver the sustained economic performance achieved by countries adopting market-based systems.

TRUE

When communism collapsed, many of the communist countries lacked the legal structure required to protect property rights because all the property was earlier held by the state.

TRUE