IB 150 Exam 1

What term is used to describe a state in which authoritarian elements have captured some or much of the machinery of state and use this in an attempt to deny basic political and civil liberties?

pseudo-democracies

According to Hernando de Soto, which of the following factors is essential for the developing world to be able to reap the benefits of innovation and entrepreneurship? -detailed state planning -market regulation -restricting direct investment by foreign enterprises -strong property rights

strong property rights

Why do you think individualism could better serve the welfare of society than collectivism?

-Guarantee of individual freedom and self-expression -Welfare of society best served by letting people pursue their own economic self-interest

How can managers make ethical decisions?

-Hire and promote people with a well-grounded sense of personal ethics -Build an organizational culture that places a high value on ethical behavior (code of ethics) -Put decision-making processes in place that require people to consider the ethical dimension of business decisions -Hire ethical officers

Which is the most enduring free trade area in the world?

European Free Trade Association (EFTA)

________ arguments suggest that improving working conditions beyond the level required by the law and necessary to maximize employee productivity will reduce profits and are therefore not appropriate.

Friedman's

Which of the following persons believed that people should be treated as ends and never purely as means to the ends of others? -David Hume -Milton Friedman -John Stuart Mill -Immanuel Kant

Immanuel Kant

Which of the following was designed to allow GM to operate ethically in South Africa as long as the company did not obey the apartheid laws in its own South African operations?

Sullivan principles

Which of the following is a reason that command economies tend to stagnate? -The abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs. -Individuals in command economy countries lack the skills to be innovative. -Costs are tightly controlled and business are forced to be efficient rather than dynamic and innovative. -All economic resources are mobilized for the public good.

The abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs.

Which of the following explains why economic integration has never been easy to achieve or sustain, despite the strong economic and political arguments in support? -While a nation as a whole may benefit significantly, certain groups may lose. -Countries fear a reduction of their political weight in the world because of economic integration. -Linking neighboring economies and making them increasingly dependent on each other creates little incentive for political cooperation. -No country has shown significant improvement because of economic integration.

While a nation as a whole may benefit significantly, certain groups may lose.

The ________ is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by member states.

World Trade Organization

Which feature of an economic union differentiates it from a common market?

a common monetary and fiscal policy

A Japanese executive's ritual of presenting a business card to a foreign business executive is an example of

a folkways.

Which of the following is a legal means by which the state can expropriate the profits from innovation? -expropriation excessive taxation -demands for money to grant a license -enforcing property rights

excessive taxation

The G20 was originally established to

formulate a coordinated policy response to financial crises in developing nations.

From least integrated to most integrated, the levels of economic integration are a:

free trade area, a customs union, a common market, an economic union, and a political union.

An international U.S.-based company sets up a production unit in a developing country with poor environmental regulations. This contributes to the

global tragedy of the commons

A ________ is an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior.

group

The volume of world trade in merchandised goods has been

growing faster than world GDP.

Hindus believe

in reincarnation, or rebirth into a different body, after death.

Which of the following is a consequence of globalization? -decreasing interdependence between national economies -increasing outsourcing of services -differentiating of material culture -increasing barriers to cross-border trade

increasing outsourcing of services

A civil law system tends to be less adversarial than a common law system because

judges' decisions are based on detailed legal codes.

In some countries, the official GNI per capita measured at PPP data does not reflect the actual total annual income because

large amounts of economic activity may be in the form of barter agreements.

Globalization of markets results in markets becoming

less diverse.

Early outsourcing efforts were primarily confined to

manufacturing activities.

In which of the following economies would the government be most likely to take into state ownership troubled firms whose continued operation is thought to be vital to national interests? -market economies -liberal economies -laissez-faire economies -mixed economies

mixed economies

A British firm that sets up production units in China is accused of releasing untreated chemical waste into water bodies. The manager of the firm defends the firm stating that, factories in China set up by French and American firms also release untreated chemical waste into water bodies. What approach to business ethics is the manager using?

naive immoralist

According to the ________, even if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should maintain the standards of the company's home country.

naive immoralist

Which of the following factors hinders globalization of consumer goods market? -higher production costs in developed nations -increased outsourcing of goods and services -national differences in tastes and preferences -homogenization of material culture

national differences in tastes and preferences

In several Western democracies, the poor performance of state-owned enterprises, because of protection from competition and guaranteed government financial support, led to

privatization

A major difference between Buddhism and Hinduism is that unlike Hinduism, Buddhism

does not support the caste system.

The finance minister of a country considers several large, state-owned iron manufacturing units to be inefficient and a source of corruption. To generate resources for public expenditure and promote economic growth, the government decides to auction an entire iron manufacturing plant to sell it to a strategic investor. This process exemplifies

privatization

In a pure market economy,

production is determined by the interaction of supply and demand.

Which system of government generally permits some individual economic freedom but restricts individual political freedom, frequently on the grounds that it would lead to the rise of communism?

right-wing totalitarianism

According to Amartya Sen, development should be

seen as a process of expanding the real freedoms that people experience.

On average, studies indicate that NAFTA's overall impact has been

small but positive

________ approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer inappropriate ethical decision making in a multinational enterprise.

straw man

Since the 1960s, which of the following has been a notable trend in the demographics of the multinational enterprise? -the growth of mini-multinationals -the growth of government-owned multinational enterprises -the decline of multinational companies in the manufacturing sector -the decline of non-U.S. multinationals

the growth of mini-multinationals

Without a strong legal system in a market economy

the incentive to engage in economic activity can be increased substantially.

GNI per person figures can be misleading because

they don't consider differences in the cost of living.

Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from Country B. Country A previously imported such machinery at lower rates from another country. Which of the following has occurred in this scenario? -trade deficit -trade diversion -efficiency gain -trade creation

trade diversion

Martin worried a lot about his job, which he chose specifically because it was very structured with clear rules and regulations. He carefully planned his career to maximize job security and retirement benefits. Martin would rate high on which of Hofstede's four dimensions?

uncertainty avoidance

Take Boeing for example, what benefits does outsourcing bring to companies? Why India has become a top outsourcing destination for American firms?

-exchange for business. -optimization of factors of production. -share risks and costs. -The country has an abundant supply of engineering talent. -Labor costs in the Indian software sector have historically been low. -Many Indians are fluent in English, which makes coordination between Western firms and India easier. -Due to time differences, Indians can work while Americans sleep, creating unique time efficiencies and an around-the-clock work environment.

Islam prohibits the payment and receipt of interest. How do Islamic banks operate and make a profit?

A mudarabah contract is similar to a profit- sharing scheme, when an Islamic bank lends money to a business, rather than charging that business interest on the loan, it takes a share in the profits that are derived from the investment. A murabaha contract is widely used primarily because it is the easiest to implement. When a firm wishes to purchase something using a loan, the firm tells the bank after having negotiated the price. Then the bank buys the equipment and sells to the borrower with a markup.

Which of the following is true regarding international businesses? -All international businesses are MNEs. -Only firms that export products are international businesses. -Only firms that invest abroad are international businesses. -All MNEs are international businesses.

All MNEs are international businesses.

Which of the following is an example of ethnocentrism? -An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms. -A manager in India looks down upon his subordinates because they are from a lower caste, compared to him. -An upper-middle-class woman talks rudely to a salesperson, because she looks down upon individuals belonging to the working class. -A French business owner, who plans to expand his market to China, conducts a detailed cultural study of China to customize his marketing campaign.

An American manager criticizes the cultural practices of Saudi Arabia, when he is sent there on business, because it differs from his own cultural norms.

________ argued that individual diversity and private ownership are desirable.

Aristotle

By adopting euro, which level of regional economic integration does EU achieve? What are the advantages and disadvantages of adopting euro?

Benefits: -Savings from having to handle one currency, rather than many -Makes it easier to compare prices across Europe -Producers are forced to look for ways to reduce production costs -Boosts development of highly liquid pan-European capital market -Will open investment options Disadvantages: -Loss of control over national monetary policy -EU is not an optimal currency area

Why corruption can be deemed as a violation of property rights? How does corruption impact a country's economy?

By siphoning off profits, corrupt politicians and bureaucrats reduce the returns to business investment and reduce the incentive of both domestic and foreign businesses to invest in that country. As a result, the lower level of investment will eventually hurt a country's economic growth.

What's the major reason for Brexit? What impacts does Brexit potentially have on Britain and the EU?

Causes: national sovereignty, immigration issues-Brexit may trigger a rush for the exits -EU without Britain will lose some of its economic and political clout on the world stage -Britain will bear significant short- to medium-term costs (decline of inward investment, relocation of UK multinationals, decline exports to the EU) -Scottish independence -In the long run, benefits depend on how well Britain negotiate trade deals with other major economies

Systems that emphasize collectivism tend toward

Democracy

Why is the European Council said to be the ultimate controlling authority within the EU? -It has the right to vote on the appointment of commissioners. -It is responsible for implementing EU legislation and monitoring compliance with EU laws by member states. -Its role in setting competition policy is becoming increasingly important to business. -Draft legislation from the commission can become EU law only if the council agrees.

Draft legislation from the commission can become EU law only if the council agrees.

The general assertion is that nations investing more in ________ will have higher economic growth rates.

Education

A country's economic development is a function of its political economy. But what's the nature of the relationship between political economy and economic progress?

Innovation -Includes not just new products, but also new processes, new organizations, new management practices, and new strategies Entrepreneurs -First to commercialize innovative products and processes -Often lead to innovation i.e,, Apple, Google, Facebook, Amazon, Dell, Microsoft, Oracle, and Uber

The products of Carmen Stores, an international sports apparel chain, are manufactured in sweatshop factories in China. According to the company president, using sweatshop labor offers a means of livelihood to children and young adults, as well as supplies good quality apparel to customers at a lower cost. She asserts that the actions of the company are justified because it results in the benefit of the maximum number of people. The company president's argument is based on which of the following ethical viewpoints?

Kantian approach to business ethics

Which of the following established the second largest currency zone in the world? -Treaty of Rome -Single European Act -Maastricht Treaty -Treaty of Lisbon

Maastricht Treaty

What are the reasons for democratic revolutions of the late 1980s and early 1990s?

Many totalitarian regimes failed to deliver economic progress to the bulk of their populations -Most of the world's strongest economies are democratic -The economic success of many of the newer democracies (Poland, Czech Republic, the Philippines, Taiwan, Chile) New information and communication technologies -The internet reduced state's ability to control access to uncensored information Economic advances have led to a prosperous middle class that has pushed for democratic reforms

Which of the following is a reason the European Union is considered an imperfect economic union? -Products and services are not allowed to move freely between member countries. -Almost all markets are heavily regulated. -Factors of production are not allowed to move freely -between member countries. -Not all members of the union have adopted the euro

Not all members of the union have adopted the euro

Hofstede culture dimensions measure culture's impact on business. What are the six dimensions and what does each dimension mean?

Power Distance -Power distance stands for inequality that is defined not from above, but from below. It is, in fact, the extent to which organizations and societies accept power differentials Uncertainty Avoidance -Uncertainty avoidance is the extent to which the members belonging to a society are capable of coping with future uncertainty without going through stress Individualism vs. Collectivism -Individualism set against its opposite collectivism defines the extent to which individuals are inclined toward remaining in groups. Masculinity vs. Femininity -Masculinity and femininity revolve around the emotional role distribution between genders, which is again a prime issue in a number of societies. Long-Term vs. Short-Term Orientation -This is based on the Confucian dynamism. According to the teachings of Confucius, the following aspects of life are evident Indulgence vs. Restraint -The dimension of indulgence vs. restraint focuses on happiness. A society that practices indulgence makes room for the comparatively free gratification of natural and basic human drives pertaining to indulging in fun and enjoying life. The quality of restraint describes a society that holds back need gratification and tries to control it through stringent social norms.

Max Weber theorized that there was a relationship between Protestantism and the emergence of modern capitalism because

Protestant ethics emphasize the importance of hard work and wealth creation and frugality.

Among all philosophical approaches to ethics, which theory (or theories) can be used as your moral compass to conduct international business? Explain.

Rights Theories - Rights establish a minimum level of morally acceptable behavior -Moral theorists argue that fundamental human rights form the basis for a moral compass that managers can use in ethical decision making -Article 1: All human beings are born free and equal in dignity and rights. -Article 23: Everyone has the right to just and favorable conditions of work, equal pay for equal work, equal protection against unemployment.

Which of the following, adopted by the member nations of the European Community in 1987, committed member countries to work toward the establishment of a single market by December 31, 1992? -Treaty of Lisbon -Treaty of Rome -Single European Act -Maastricht Treaty

Single European Act

Which of the following statements is true about a class system? -A class system is a closed form of stratification. -In a class system, social position is determined at birth and cannot be changed during an individual's lifetime. -Social mobility within a class system varies from society to society. -A class system is a more rigid form of social stratification, compared to a caste system.

Social mobility within a class system varies from society to society.

Which of the following observations is correct? -The Koran speaks disapprovingly of earning legitimate profit through trade and commerce. -Protection of the right to private property is not acceptable within Islam. -The economic principles of Islam prohibit the payment or receipt of interest. -The economic principles established in the Koran are against free enterprise.

The economic principles of Islam prohibit the payment or receipt of interest.

Managing an international business is different from managing a purely domestic business for which of the following reasons? -Countries prefer to keep business transactions between domestic partners. -The range of problems confronted is wider and more complex. -International transactions involve exchanging currencies through each country's treasury. -International businesses have an added layer of U.N. regulations.

The range of problems confronted is wider and more complex.

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics because of which of the following? -They are psychologically and geographically closer to the parent company. -They may be surrounded by local employees who have more rigorous ethical standards. -They may be based in a culture that does not place the same value on ethical norms important in the manager's home country. -They are surrounded by their ordinary social context and supporting culture.

They may be based in a culture that does not place the same value on ethical norms important in the manager's home country.

Which of the following is a step involved in the deregulation of a command economy?

abolishing laws regulating the establishment and operation of private enterprises

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.

An upper-middle-class manager tends to have hostile relationships with the working-class employees in the firm because of his tendency to perceive himself as superior to them based on his class background. In this example, the manager exhibits

class consciousness.

When ________ is emphasized, an individual's right to do something may be restricted on the grounds that it runs counter to "the good of society."

collectivism

Child labor is permitted and widely employed in Country X. A multinational company entering Country X decides to employ minors in its subsidiary, even though it is against the multinational's home-country ethics. Which of the following approaches to business ethics would justify the actions of the multinational company?

cultural relativism