International Business - Ch 3

Privatization became a worldwide practice starting in the

1980s

In which of these countries is the cost-benefit-risk trade-off likely to be MOST favorable?

A country with a free market system

Identify the CORRECT statement from the following:

A country's investment in education and subsequent growth rates result in a more productive population.

What risk is associated with a change in the political economy?

A multipolar world, controlled by a number of civilizations, could replace the bipolar world.

Refer to Map 3.1 in the text. Which four countries have high gross national income (GNI) per capita (based on 2017 data)? (Check all that apply.)

Australia Switzerland Sweden Japan

To determine which country is attractive for potential investments, you need to balance which three considerations? (Check all that apply.)

Benefits Risks Costs

Based on market potential, _____ has the ability to have a larger market than the United States, the European Union, and Japan combined.

China

Which statement accurately describes the economic prospects in a country?

Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than other economies.

Which of these situations relates to Sachs's view on a country's economic development?

Country A has the benefit of nutrient-rich soil which provides a competitive advantage for the country's tobacco industry.

What is one of the steps that pave the way for a shift toward a market-based economic system?

Creation of a legal system to safeguard property rights

______ involves removing or reducing government regulations, typically in the economic sphere.

Deregulation

Which of these statements would Amartya Sen agree with?

Development requires the removal of social deprivation.

______ are those individuals who first commercialize a concept, service, or product.

Entrepreneurs

True or False: Economic risks are independent of political risks.

False

True or False: The recent fast-paced economic growth in some Asian economies can be attributed to their adoption of more totalitarian forms of government.

False

True or false: Market-based economic systems have failed to produce the same high level of economic performance that command and mixed economies have.

False

True or false: The PPP adjustment is used in business to balance credits and debits at the end of the accounting cycle.

False

The Heritage Foundation index of economic freedom is based on ten indicators. Which of these four are included in that index? (Check all that apply.)

Foreign investment regulations Labor freedom Taxation rules Trade policy

The privatization movement was started in

Great Britain in the 1980s with the sale of British Telecom.

______ measures the total annual income received by residents of a country.

Gross national income

How does Samuel Huntington's argument about the new world order differ from the view of Fukuyama?

Huntington believed the world would be split into different civilizations with their own ideology.

What two countries are identified in the text as being currently underdeveloped and having the greatest market potential for business?

India China

Which economic system is MOST conducive to innovation and entrepreneurial activity?

Market economies

Which businessperson is an example of an entrepreneur?

Natalia, the CEO and founder of Mountain Top Inc., an adventure travel company

______ is one of the steps necessary for a country to shift toward a market-based economic system.

Privatization

______ is seen as a transfer of ownership of a business, property or enterprise from the public sector to the private sector.

Privatization

Which statement accurately describes the effects of social unrest on a country?

Social unrest can result in abrupt changes in government which tend to have negative economic implications.

The GNI per capita of a country is $5,000, but the PPP per capita is $8,000. Which of the following can be inferred from the given data?

The cost of living is lower in that country than the United States.

In many nations, which social class has benefited from economic advances and seen the emergence of prosperity?

The middle class

What is an example of a transaction that would take place in the shadow economy of a country?

To avoid paying the federal gift tax, the broker advised his client to transfer the funds without declaring them as a gift.

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

True

True or False: The Chinese government passed a law that provided private property owners with the same protections granted to the state. Hernando de Soto would be in favor of this law.

True

Legal risk is evident in a country that has _____.

a violation of property rights

An international firm, entering a country's market early, may achieve a significant payback if that country

achieves sustained high economic growth rates.

Economic progress often leads to

adoption of a democratic government.

With the collapse of communism in eastern Europe, many countries didn't have a legal structure in place to protect property rights because

all property had previously been held by the state.

Within the Human Development Index, for a country to have "medium" human development it must score

between 0.5-0.8.

What economic tactic was used when former communist countries removed price controls and allowed prices to be set as the result of supply and demand?

deregulation

Gross national income (GNI) per person figures can provide an incomplete picture because they

don't factor in the cost of living.

When comparing early and late entrants into a market, it can be said that

early entrants build brand loyalty and gain experience in a country's business practices.

A(n) ______ risk is the chance that conditions like a change in exchange rates will affect an investment.

economic

FarmDay Inc. decided not to conduct business in the nation of Bartu because it learned that most businesses in the country were in debt. FarmDay Inc. was assessing _____ risk to make its decision.

economic

Sachs would agree that _____ helps explain why Malaysia and Singapore have been able to overcome the issues associated with their tropical geography and achieve economic growth faster than some tropical nations in Africa.

education

One reason for the spread of democracy across the globe is the

failure of totalitarian regimes to provide economic progress to the majority of their citizens

Jeffrey Sachs argued that the ______ of a nation can have an impact on economic development.

geography

According to Huntington, ______ is a conflict that results from the strong ideological boundaries separating civilizations from one another.

global terrorism

When analyzing the process of innovation, it can be said that it

goes hand-in-hand with entrepreneurship.

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

good

One positive aspect of innovation is that it

increases the economic activity within a country.

As defined in the text, _____ includes a company's new products, new processes, new organization, new management practices and new strategies.

innovation

The development of a new idea, process, method or technology is called ______.

innovation

When assessing the legal factors that determine the cost of doing business in a country, it's important to know that

it can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety.

A(n) ______ risk is one that arises from failure to follow statutory or regulatory obligations and, therefore, one that can impact a trading partner.

legal

It is ______ for the government to expropriate profits from innovation through excessive taxation. (Choose between legal or illegal)

legal

Without a legal system that protects property rights, and the machinery that enforces those rights, there is substantially _____ incentive to engage in economic activity.

less

Francis Fukuyama's argument regarding the new world order was that

liberal democracy has triumphed and will become the final form of human government.

What three factors are assessed to determine the Human Development Index of a country?

life expectancy at birth average incomes educational attainment

The Human Development Index is based on

life expectancy at birth.

South Korea was considered an impoverished country in 1960. Yet in 2017, it was the world's 11th largest economy. International businesses must consider the present wealth of customers as well as the

likely future wealth of the consumers.

Hernando de Soto's arguments to improve property rights protection stemmed from the fact that

many property owners in poor countries can't establish legal title to property they own.

Innovators and entrepreneurs flourish most in a _____ because _____.

market economy; it grants existing businesses and entrepreneurs the freedom to improve their operations through innovation

The Heritage Foundation's index measures the degree of economic freedom in the nations -- in other words, the degree of shift to ______ economic systems.

market-based

Property rights are only truly secure when a _____ exists.

mature democratic state

It would probably be _____ costly to do business in a relatively underdeveloped economy.

more

The process of privatization fails to perform as expected when

newly privatized firms are protected from foreign competition.

Refer to Map 3.6 in the text. This map shows that Singapore ranks in the top two states in terms of economic freedom. Yet in terms of political freedom, Singapore is ranked as _____ on the Freedom House's index.

partly free

Joaquin is worried about his company locating a manufacturing facility in Indonesia because of the unstable government which could devastate their business. Which type of risk is affecting Joaquin's decision?

political

The likelihood that political forces will cause drastic changes in a country's business environment and adversely affect the potential for a company to make a profit is called a _____ risk.

political

When Hugo Chavez took over power in Venezuela, he railed against American imperialism. Western enterprises doing business in that country were concerned how this would affect their interactions with Venezuela. This demonstrates how ______ can impact the economics of a country.

political change

One thing the Human Development Index does not assess but which Amartya Sen believes should be included to determine development is

political freedoms

The government of a foreign nation had controlled the oil and gas industry for many years but recently transferred the business into the hands of several small businesses. These companies are now motivated to increase productivity and enter new markets to achieve greater profits. What tactic did this nation use to help it move toward a market-based economic system?

privatization

The long-run monetary benefits of doing business in a country are influenced by the

purchasing power of consumers.

The ______ adjustment helps provide a more direct comparison of the living standards found in different countries.

purchasing power parity

One indicator of economic mismanagement in a country is the

rate of inflation

A lack of _____ has been blamed by many as the cause of the problems that led to the global financial crisis of 2008-2009.

regulation

To foster innovation in the business environment, it is important that strong legal protection of property rights is in place. Inadequately enforced property rights can lead to an increase in the

risk of expropriation of profits.

One factor that could topple democracy in a newer democratic state is

severe economic setback.

When discussing the changes in the political and economic systems of the world, it can be said that

the battle between the ideologies of collectivism and individualism is less distinct today.

When discussing economic development, Amartya Sen said that development should be measured by

the capabilities and opportunities people enjoy.

The base used to make the purchasing power parity adjustment is

the cost of living in the United States.

According to Samuel Huntington's thesis, global terrorism is

the result of a clash of value systems.

In some countries, barter agreements take the place of cash transactions and this skews the "official" economic activity figures. This is referred to as _____.

the shadow economy

One change in the political systems of nations since the late 1980s is that

totalitarian governments failed and were replaced by democratically elected governments usually supportive of free market capitalism.

In the past 40 years, China, South Korea, Taiwan, Singapore, and Hong Kong had the fastest-growing economies. These nations also had ______ in place.

undemocratic governments