chp 3 practice exam (fun.int.bus.)

Wharton Enterprises, a U.S. firm, manufactures small kitchen appliances. The firm has recently developed an innovative blender design that Wharton executives anticipate being very profitable. Currently, Wharton has production facilities in the U.S. and China. Wharton executives are trying to determine where the new product should be manufactured. Which of the following best supports a decision to manufacture the new product in the U.S. instead of China?

Intellectual property rights are strongly protected by U.S. patent laws.

Garnet Footwear suffered significant financial losses and had to close its foreign operations. The dissolution process took six months and cost four percent of the firm's estate. Where was Garnet's foreign operations most likely located?

Japan

Which of the following statements about approaches to political risk management is NOT true? A) Passive political risk management discourages managers from fully or partially hedging their bets against exposure to political hazards. B) Passive political risk management assumes that it is difficult, if not impossible, to systematically model political risk. C) Active political risk management assumes that positive and negative political events in any country are neither independent nor random events. D) Active political risk management assumes that political events unfold in observable patterns that statistical methods can detect.

Passive political risk management discourages managers from fully or partially hedging their bets against exposure to political hazards.

In which of the following countries would business activity, given its status as a "not free" marketplace, be under the greatest government control? A) Vietnam B) Pakistan C) India D) Brazil

Vietnam

Which of the following is most likely a true statement regarding the rule of law? The rule of law is a hallmark of ________.

a democratic government

A political ideology is the collection of ideas that expresses the goals, theories, and aims that constitute a sociopolitical program

true

Laws on local business activities directly influence the operations of domestic and foreign companies in areas such as hiring and firing workers.

true

Managers who take an active approach to political risk management are likely to rely on statistical modeling to quantify the precise degree of political risk.

true

Multilateral development banks encourage development in risky environments through financial incentives.

true

Research indicates that democracy is declining around the world and that totalitarian regimes are increasing.

true

Under the ________ form of totalitarianism, the regime confines itself to political control of the state. It does not regulate the economic and social structure of society.

authoritarian

Which of the following types of political risks often is caused by ethnic conflict or civil disorder and includes those random political developments that adversely affect the operations of all companies in a country?

catastrophic political risk

Ian, a financial manager, is preparing to transfer to Germany where he will serve as an expatriate manager of his employer's European office. With which type of legal system will Ian most likely have to deal with in Germany?

civil

Countries with a ________ legal system tend to encourage precise, detailed contracts, whereas countries with a ________ legal system tend to encourage shorter and less specific contracts.

common; civil

_______ refers to a political system in which government is organized by and accountable to the people.

democracy

The vigor of IPR protection is highly related to a country's stage of

economic development

Local content regulations are primarily intended to ________.

encourage MNEs to increase production activities in a country

A civil law system anchors itself in the wisdom of daily experience or, more intellectually, great spiritual or philosophical traditions

false

According to EIU research, 37% of the world's population live in full democracies.

false

Countries with a theocratic legal system encourage precise, detailed contracts whereas countries with a common legal system encourage shorter and less specific contracts

false

Political risk insurance is more likely to be purchased by MNEs that apply an active approach to political risk management.

false

Totalitarian countries are favored by MNEs because state governments typically favor foreign investors over local companies.

false

Countries often use local content regulations to determine the proportion of the product that must be made in the local market versus made outside of the local market in order to ________.

favor domestic companies

The distinguishing feature of political ideologies along the political spectrum is ________, with some emphasizing its primacy and others opposing it.

freedom

The pushback against democracy has powered a rise in totalitarianism, a situation that is likely to include which of the following?

increasing adoption of the principles of the rule of man

A U.S. firm with manufacturing facilities in Nigeria will most likely be faced with a ________ legal system.

mixed

In a totalitarian political system,

one agent monopolizes political power

A(n) ________ ideology is the system of ideas that expresses the goals, theories, and aims of how society should work.

political

The rule of law holds that governmental authority is legitimately exercised only in accordance with written, publicly disclosed laws that have been appropriately adopted and which are enforced in keeping with established procedure.

true

Select the correct order, going from low to high total impact on an MNE, of the following types of political risk: (1) procedural political risks, (2) systemic political risks, (3) distributive political risks, (4) catastrophic political risks.

2, 1, 3, 4

The largest percentage of nations, within a contiguous geographic region, that adhere to the rule of man are located in ________.

Central Africa

Which of the following statements referring to intellectual property rights and violations is INCORRECT? A) Richer countries claim looser regulation of intellectual property rights will hinder innovation. B) Companies can register a global patent, trademark, or copyright through the World Trade Organization (WTO). C) The International Anti-Counterfeiting Coalition estimates international trade in counterfeit products at $600 billion a year. D) Developing markets claim tougher regulation of IPRs will slow, if not halt, their economic development.

Companies can register a global patent, trademark, or copyright through the World Trade Organization (WTO).

A system of ________ law sets the framework for the system of government and defines the authority and procedure of political bodies to establish laws and regulations.

Constitutional

Which of the following statements best describes a pluralistic society?

Different ideologies are held by different segments of society.

________ is the chance that political forces may change a country's business environment in ways that lead investors to lose some or all of the value of their investment or be forced to accept a lower-than-projected rate of return.

Political risk

________ political risks arise from political actions, such as public corruption or a partisan judicial system, that interfere with transactions between sellers and buyers and that can significantly raise the costs of getting things done.

Procedural

Which of the following is a true statement about China?

The Chinese government manipulates market activities for political purposes

Which of the following is NOT a component of modern legal systems?

private law

Logan Electronics has a production facility in Bolivia. Recently, the firm was taxed at a significantly higher rate than a local electronics company. Which type of political risk is Logan most likely experiencing?

procedural

Which of the following would most likely be used in a totalitarian system to promote unconditional support for the official ideology?

state control of the education system

Harmon Clothing has a production facility located in Venezuela. Recently, Harmon has been unable to arrange for overseas loans due to the burdensome regulatory policies of the Venezuelan government. Which type of political risk is Harmon most likely experiencing?

systematic