IBUS Midterm

________ are typically defined on the basis of characteristics such as family background, occupation, and income. A) Social strata B) Norms C) Social structure D) Groups

A All societies are stratified on a hierarchical basis into social categories— that is, intosocial strata. These strata are typically defined on the basis of socioeconomic characteristics such as family background, occupation, and income.

________ involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. A) An economic union B) A common market C) A customs union D) A free trade area

A An economic union involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.

The _____ dimension of Hofstede's study explores how a society deals with the fact that people are unequal in physical and intellectual capabilities. A) power distanceB) individualism versus collectivism C) uncertainty avoidanceD) masculinity versus femininity

A Hofstede's power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities.

Tariffs do not benefit A) consumers. B) domestic producers. C) governments. D) domestic firms.

A The important thing to understand about an import tariff is who suffers and who gains. The government gains, because the tariff increases government revenues. Domestic producers gain, because the tariff affords them some protection against foreign competitors by increasing the cost of imported foreign goods. Consumers lose because they must pay more for certain imports.

The _____ refers to the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs. A) long-term versus short-term orientation dimension B) indulgence versus restraint dimension C) uncertainty avoidance D) power distance dimension

A The long-term versus short-term orientation dimension captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors. The label refers to these "values" being derived from Confucian teachings.

What was the main objection raised by those in the United States and Canada who opposed the ratification of the NAFTA? A) job losses B) balance-of-payment problems C) threat of competition from Asian companies D) threat of a loss of national sovereignty

A Those who opposed NAFTA claimed that ratification would be followed by a mass exodus of jobs from the United States and Canada into Mexico as employers sought to profit from Mexico's lower wages and less strict environmental and labor laws.

A caste system differs from a class system because A) a caste system is an open system of stratification, while a class system is a closed system of stratification. B) it is not possible for an individual to change his or her caste, while a class system allows people to change their class through individual achievement. C) the social mobility in caste systems varies from society to society, while in a class system there is no social mobility. D) a caste system is a less rigid form of social stratification, while a class system is a comparatively more rigid form of social stratification.

B A caste system is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime. A class system is a form of open stratification in which the position a person has by birth can be changed through his or her own achievements or luck.

From least integrated to most integrated, the levels of economic integration are a A) common market, a free trade area, an economic union, a customs union, and a political union. B) free trade area, a customs union, a common market, an economic union, and a political union. C) customs union, a free trade area, a common market, a political union, and an economic union. D) common market, an economic union, a customs union, a free trade area, and a political union.

B Several levels of economic integration are possible in theory. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic union, and, finally, a full political union.

_____ supports the idea that countries should export more than they import. A) Absolute advantage B) Mercantilism C) The world market theory D) New trade theory

B The main tenet of mercantilism was that it is in a country's best interests to maintain a trade surplus, to export more than it imported.

The theory of comparative advantage provides strong rationale for supporting the idea of A) business nationalism. B) free trade. C) protectionist trade policies. D) governmental intervention in trade.

B The theory of comparative advantage suggests that trade is a positive- sum game in which all countries that participate realize economic gains. As such, this theory provides a strong rationale for encouraging free trade.

Tariff rate quotas are common in agriculture, where their goal is to A) reduce the use of synthetic fertilizers. B) limit imports over quota. C) increase agricultural imports. D) increase foreign competition.

B Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than those over the quota. Tariff rate quotas are common in agriculture, where their goal is to limit imports over quota.

________ entails even closer economic integration and cooperation than a common market. A) A customs union B) A free trade area C) An economic union D) A political union

C An economic union entails even closer economic integration and cooperation than a common market.

_____ eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. A) A free trade area B) A common market C) An economic union D) A customs union

C An economic union entails even closer economic integration and cooperation than a common market. Like the common market, an economic union involves the free flow of products and factors of production among member countries and the adoption of a common external trade policy, but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.

Which of the following is a theory that can be used to justify limited government intervention to support the development of certain export-oriented industries? A) Smith's theory B) Ricardo's theory C) new trade theory D) Heckscher-Ohlin theory

C Both the new trade theory and Porter's theory of national competitive advantage can be interpreted as justifying some limited government intervention to support the development of certain export-oriented industries.

What is ethnocentrism? A) a belief in the superiority of one's business or organization over another B) a belief in the superiority of another group or culture over one's own group or culture C) a belief in the superiority of one's own ethnic group or culture D) a belief in the superiority of one's self over another person

C Ethnocentrism is a belief in the superiority of one's own ethnic group or culture. Hand in hand with ethnocentrism goes a disregard or contempt for the culture of other countries.

Which of the following refers to a situation where a government does not attempt to influence through quotas or tariffs what its citizens can buy from another country? A) economic patriotism B) protectionism C) free trade D) offshoring

C Free trade refers to a situation where a government does not attempt to influence through quotas ortariffs what its citizens can buy from another country, or what they can produce and sell to another country.

The social organization of Western society tends to emphasize on A) a group orientation. B) collectivist values. C) individual achievement. D) work groups.

C In general, Western societies tend to emphasize the importance of the individual, whereas groups tend to figure much larger in many other societies.

Which of the following is a consequence of subsidies? A) Subsidies make domestic producers vulnerable to foreign competition. B) Subsidies lead to lowered production. C) Subsidies protect inefficient domestic producers. D) Subsidies produce revenue for the government.

C In practice, many subsidies are not that successful at increasing the international competitiveness of domestic producers. Rather, they tend to protect the inefficient and promote excess production.

Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to A) influence the assignment of tariffs. B) influence the assignment of quotas C) capture first-mover advantages. D) capitalize on late-mover advantages.

C Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to capture first-mover advantages. According to strategic trade policy, a government can help raise national incomes if it can ensure that the firms that gain first-mover advantages in such industries are domestic rather than foreign. Further, the theory argues that it might pay governments to intervene in an industry if it helps domestic firms overcome the barriers to entry created by foreign firms that have already reaped first-mover advantages.

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter? A) communication infrastructure B) skilled labor C) natural resources D) technological knowledge

C Such factors as natural resources, climate, location, and demographics are basic factors. Factors such as communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how are examples of advanced factors.

____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. A) Trade deficitB) Trade diversion C) Trade creation D) Trade distortion

C Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

A _____ is a less rigid form of social stratification in which social mobility is possible. A) caste system B) normative system C) religious system D) class system

D A class system is a less rigid form of social stratification in which social mobility is possible.

Under the mudarabah banking system, when an Islamic bank lends money to a business A) it charges that business interest on the loan. B) the business needs to pay back the loan with an additional markup. C) it has to donate the interest received on the loan to a charitable trust. D) it takes a share in the profits that are derived from the investment.

D A mudarabah contract is similar to a profit-sharing scheme. Under mudarabah, 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.

New trade theory suggests that nations A) increase their commitment to research and development. B) adopt policies that promote strong competition within domestic markets. C) cannot benefit from trade when they do not differ in resource endowments or technology.D) may benefit from trade even when they do not differ in resource endowments or technology.

D New trade theory suggests that nations may benefit from trade even when they do not differ in resource endowments or technology.

Economist Paul Krugman has suggested that trade policy designed to retaliate against another country's trade policy would A) benefit the multinational firms of both countries. B) benefit the citizens of both countries. C) hurt the multinational firms of both countries. D) hurt the citizens of both countries.

D Paul Krugman argues that a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar- thy-neighbor policy that boosts national income at the expense of other countries. In many cases, the resulting trade war between two or more interventionist governments will leave all countries involved worse off than if a hands-off approach had been adopted in the first place.

Porter argues that a nation's firms gain competitive advantage if A) their domestic consumers lack technical awareness. B) they function in a labor-intensive market. C) the country has an abundant supply of unskilled workers. D) their domestic consumers and markets are sophisticated and demanding.

D Porter argues that a nation's firms gain competitive advantage if their domestic consumers and markets are sophisticated and demanding.

Specific tariffs are A) levied as a proportion of the value of the imported good. B) government payment to domestic producers. C) in the form of manufacturing or production requirements of goods. D) levied as a fixed charge for each unit of a good imported.

D Specific tariffs are levied as a fixed charge for each unit of a good imported (for example, $3 per barrel of oil).

According to the Buy America Act, if a company wishes to win a contract from a U.S. government agency to provide some equipment, it must ensure that at least 51 percent of the product by value is manufactured in the United States. This is an example of A) antidumping duties. B) voluntary export restraints. C) import quotas. D) local content requirements.

D The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage. The law specifies a product as "American" if 51 percent of the materials by value are produced domestically. This amounts to a local content requirement.

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods? A) Porter's theory B) Smith's theory C) Ricardo's theory D) Heckscher-Ohlin theory

D The Heckscher-Ohlin theory emphasizes the interplay between the proportions in which the factors of production (such as land, labor, and capital) are available in different countries and the proportions in which they are needed for producing particular goods.

A capital-intensive country exports products that are capital intensive. Which theory is this an example of? A) new trade B) Leontief paradox C) Porter's diamond D) Heckscher-Ohlin

D The given situation follows the Heckscher-Ohlin theory.

The infant industry argument is criticized because it relies on an assumption that A) new manufacturing industries in developing nations can initially compete with established industries in developed countries. B) selling goods in a foreign market at below their "fair" market value is legally and ethically justified. C) the domestic industry in a developing nation lacks the capacity to meet demand. D) firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.

D The infant industry argument relies on an assumption that firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market. Consequently, governments have been required to subsidize long-term investments.

The lowering of barriers to trade and investment among countries has led to _____ throughout the EU. A) higher costs of borrowing B) increase prices C) increase in hedging costs D) increased price competition

D The lowering of barriers to trade and investment between countries has led to increased price competition throughout the EU and NAFTA.

Hofstede's study found that in masculine cultures, sex roles were less sharply distinguished, and little differentiation was made between men and women in the same job.

FALSE Hofstede's masculinity versus femininity dimension looked at the relationship between gender and work roles. In masculine cultures, sex roles were sharply differentiated and traditional "masculine values," such as achievement and the effective exercise of power, determined cultural ideals.

Because of the fact that everyone benefits from economic integration, it is easy to achieve and sustain.

FALSE While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups will lose, at least in the short to medium term.

A caste system is a closed system of stratification in which social position is determined by the family into which the person is born.

TRUE A caste system is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.

Antidumping actions are concentrated in certain sectors of the economy such as basic metal industries, chemicals, plastics, and machinery and electrical equipment.

TRUE Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery and electrical equipment. These four sectors since 1995 have been characterized by periods of intense competition and excess productive capacity, which have led to low prices and profits (or losses) for firms in those industries.

Local content regulations provide protection for a domestic producer of parts by limiting foreign competition.

TRUE Local content regulations provide protection for a domestic producer of parts in the same way an import quota does: by limiting foreign competition. The aggregate economic effects are also the same; domestic producers benefit, but the restrictions on imports raise the prices of imported components.

A central reason for the establishment of the EU was the devastation of Western Europe during two world wars and the desire for a lasting peace.

TRUE The European Union (EU) is the product of two political factors: (1) the devastation of Western Europe during two world wars and the desire for a lasting peace, and (2) the European nations' desire to hold their own on the world's political and economic stage.

Coordination and policy harmonization problems increase as the number of countries that seek agreement increases.

TRUE The greater the number of countries involved, the more perspectives that must be reconciled, and the harder it will be to reach agreement.