International Business Exam 2 chapter 7

Manufacturers face legal penalties and lawsuits under product safety and liability laws if they are responsible for damage, injury, or death caused by defective products T/F

True

Market forces and free trade are encouraged in democracies T/F

True

Most democracies include elements of socialism T/F

True

Nationalization describes government seizure of an entire industry, with or without compensation. T/F

True

Of the five types of participants that are active in transforming political and legal systems, the public sector is the most important T/F

True

Socialism is based on a collectivist ideology which assumes that the collective welfare of people outweighs the welfare of the individual. T/F

True

Special interest groups serve the interests of particular countries, industries, or causes T/F

True

The European Union is classified as a(n) ________. A) international organization B) regional economic bloc C) special interest group D) competing firm

B) regional economic bloc

________ are the people and organizations that support the political system and receive government resources. A) Subsidiaries B) Regional trade blocs C) Constituents D) Shell corporations

C) Constituents

Which of the following is a typical complaint of host-country competitors against foreign firms? A) Foreign firms burden the host-country with infrastructure requirements. B) Foreign firms do not have to obey host-country laws and regulations. C) Foreign firms receive financial support from host-country governments. D) Foreign firms lure host-country workers to the home-country businesses.

C) Foreign firms receive financial support from host-country governments.

Expropriation is the term used to describe a host-country government seizing the assets of a foreign corporation and providing no compensation in return. T/F

False

Like most legal systems, Islamic law evolves with changing times to better meet the needs of the Islamic society T/F

False

The protection of intellectual property rights is guaranteed and enforceable in every country in the world T/F

False

Totalitarianism's fundamental tenet is that capital and wealth should be vested in the state and used primarily as a means of production rather than for profit. T/F

False

Trade unions are part of a country's legal system. T/F

False

Confiscation is the seizure of assets with compensation. T/F

False

Country risk is present in select nations. T/F

False

World Conference (Scenario) At a world conference to be conducted in Tokyo, representatives from nearly every country in the world will gather to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society. Representative C is most likely from ________. A) Canada B) Sudan C) North Korea D) Zimbabwe

A) Canada

Which of the following types of organizations would wield the greatest power over a firm attempting to do business in Canada? A) Canada's Ministry of Foreign Affairs B) World Trade Organization C) North American Free Trade Agreement D) Public Works and Government Services Canada

A) Canada's Ministry of Foreign Affairs

________ is the seizure of corporate assets without compensation. A) Confiscation B) Expropriation C) Embargo D) Sanction

A) Confiscation

Host-Country Legal System (Scenario) Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway. Which of the following supports a decision in favor of Super Sports opening a store in Norway? A) MNEs may transfer profits back to the home country without restriction. B) The opening of warehouse-style stores requires the approval of local retailers. C) Product injury cases generally rule in favor of plaintiffs regardless of evidence. D) Advertising and marketing of particular products are banned under local distribution laws

A) MNEs may transfer profits back to the home country without restriction

Which of the following countries is considered a mixed economy? A) Norway B) Russia C) Vietnam D) China

A) Norway

What has been the impact of social democracy on international business relations in some European countries? A) Regulations have forced foreign firms to invest elsewhere. B) Politically conscious foreign firms have begun investing in socialist nations. C) Low income tax rates have encouraged an influx of FDI. D) Political stability has decreased the country risk of socialist nations

A) Regulations have forced foreign firms to invest elsewhere

Which of the following statements is true about managing country risk? A) Scanning allows a firm to assess the potential country risk. B) Firms can reduce country risk by entering markets in collaboration with a foreign partner. C) Country risk can seldom be anticipated by advance research. D) Home-country employees are the best source for anticipating country risk in host-countries

A) Scanning allows a firm to assess the potential country risk

________ fundamental tenet is that capital and wealth should be vested in the state and used primarily as a means of production rather than for profit. A) Socialism's B) Democracy's C) Totalitarianism's D) Theocracy's

A) Socialism's

Which of the following legal systems is based on legal precedents and past practices set by the nation's courts through interpretation of statutes, legislation, and past rulings? A) common B) religious C) socialist D) civil

A) common

Common and Civil Law (Scenario) Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term. Which of the following supports Country A over Country B? A) contractual noncompliance provisions are broader in scope B) contracts are so detailed that they are expensive to draft C) higher flexibility compared to other legal systems D) judges confer with legislators on international business issues

A) contractual noncompliance provisions are broader in scope

A(n) ________ is an official ban on exports to or imports from a particular country, in order to isolate it and punish its government. A) embargo B) confiscation C) expropriation D) sanction

A) embargo

The World Bank is classified as a(n) ________. A) international organization B) regional economic bloc C) special interest group D) competing firm

A) international organization

Country risk is considered similar to ________. A) political risk B) commercial risk C) currency risk D) cross-cultural risk

A) political risk

Which of the following legal systems is largely practiced in the Middle East? A) religious B) socialist C) civil D) common

A) religious

Religion-based totalitarian states are called ________. A) theocratic B) secular C) socialistic D) atheistic

A) theocratic

The three major types of current political systems are ________. A) totalitarianism, socialism, and democracy B) socialism, democracy, and monarchy C) totalitarianism, liberalism, and fascism D) democracy, republicanism, and oligarchy

A) totalitarianism, socialism, and democracy

An individual from a country with a low degree of political risk would most likely be from ________. A) Venezuela B) Canada C) Zimbabwe D) Iraq

B) Canada

________ is seizure of corporate assets with compensation. A) Confiscation B) Expropriation C) Embargo D) Sanction

B) Expropriation

Common and Civil Law (Scenario) Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term. Which of the following statements supports Country B over Country A? A) Rules and principles form the starting point for legal reasoning and administering justice. B) The flexibility of common law allows for judicial interpretation in unique cases. C) Common law nations administer justice based on a structured set of rules. D) Laws are primarily legislative in origin and based on laws passed by national and local legislatures

B) The flexibility of common law allows for judicial interpretation in unique cases

Which of the following is the underlying principle of socialism? A) The welfare of individuals far outweighs the welfare of society. B) The well-being of the group supersedes the well-being of individuals. C) Capital and wealth should be vested in the hands of few and used primarily as a means of profit. D) The state should protect itself from individual and group interests

B) The well-being of the group supersedes the well-being of individuals

World Conference (Scenario) At a world conference to be conducted in Tokyo, representatives from nearly every country in the world will gather to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society. 77) Which of the following countries would Representative A most likely be from? A) Denmark B) Zimbabwe C) Sweden D) Australia

B) Zimbabwe

Which form of government is characterized by private property rights and limited government? A) autocratic B) democratic C) socialist D) totalitarian

B) democratic

Which of the following would be the best way for a manager to learn about country risks in a host country? A) analysis of records of competitor firms B) employees working in the host country C) host country nationals working abroad D) employees working in the home country

B) employees working in the host country

Which of the following terms refer to the application of home-country laws to persons or conduct outside national borders? A) anti-boycott regulations B) extraterritoriality C) transparency D) anti-dumping policies

B) extraterritoriality

Income repatriation laws affect MNEs that earn profits in foreign countries by ________. A) enforcing strict stipulations on cross-border transactions and joint ventures B) limiting the amount of net income and dividends that can be transferred to the home-country headquarters C) restricting the amount of earned income being re-invested in the foreign facility D) imposing restrictions on the distribution of products from the foreign facility

B) limiting the amount of net income and dividends that can be transferred to the home-country headquarters

Host-Country Legal System (Scenario) Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway Which of the following would most likely oppose the opening of a Super Sports store in Norway? A) labor unions B) local sports retailers C) international banks D) local sports enthusiasts

B) local sports retailers

Boycotts and protests have the potential to harm businesses by ________. A) preventing businesses from shipping their products to foreign markets B) reducing sales and requiring additional public relations activity C) destroying the ability of all local firms to carry on normal business operations D) raising concerns about a firm's foreign operations by initiating lawsuits

B) reducing sales and requiring additional public relations activity

Which of the following is characteristic of an effective legal system? A) a stable and rigid framework of rules and norms across nations B) systematically enforced laws and regulations C) political involvement in business transactions D) universal emphasis on religious law over common and civil law

B) systematically enforced laws and regulations

Both common law and civil law systems originated in ________. A) eastern Europe B) western Europe C) western Asia D) eastern Asia

B) western Europe

Common and Civil Law (Scenario) Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term. Which of the following questions would be more important for Zane legal experts to consider before recommending Country A or Country B? A) Have other corporations based in these two countries been profitable? B) What is the prevalence of industrial crime in these two countries? C) How would a contractual dispute with a local vendor be resolved? D) Would local environmental organizations target Zane for its manufacturing practices?

C) How would a contractual dispute with a local vendor be resolved?

Which of the following countries is considered primarily socialist? A) Germany B) Canada C) India D) Libya

C) India

An individual from a country with a high degree of political risk would most likely be from ________. A) Canada B) Singapore C) Iraq D) Japan

C) Iraq

The most widespread form of religious law is ________ law. A) Hindu B) Jewish C) Islamic D) Catholic

C) Islamic

World Conference (Scenario) At a world conference to be conducted in Tokyo, representatives from nearly every country in the world will gather to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society. Representative B is most likely from ________. A) New Zealand B) North Korea C) Russia D) Canada

C) Russia

Host-Country Legal System (Scenario) Super Sports, a large sporting goods chain based in Australia, wants to open a store in Norway. With stores around the world, Super Sports executives realize that legal systems vary from country to country. Having never opened a store in Norway, the Super Sports legal team is investigating Norwegian laws to determine how they would impact the corporation and its ability to do business in Norway. 84) Which of the following is the most important issue to consider when determining the best entry strategy for Super Sports? A) What are the regulations regarding income repatriation? B) What type of promotion and advertising is prohibited? C) What are the restrictions on inward foreign direct investment? D) Is the recycling of product packaging mandatory?

C) What are the restrictions on inward foreign direct investment?

A(n) ________ is a voluntary refusal to engage in commercial dealings with a nation or a company A) expropriation B) sanction C) boycott D) confiscation

C) boycott

Which of the following is an element of socialism often found in democratic societies? A) government subsidies for foreign firms B) government sponsored businesses C) government intervention in the affairs of individuals and firms D) government control of information technology

C) government intervention in the affairs of individuals and firms

The United States restricts foreign investments that might affect ________. A) immigration reforms B) labor negotiations C) national security D) manufacturing technologies

C) national security

Which of the following best explains why India was once characterized by high country risk? A) taxes and financial incentives benefited Indian businesses over foreign firms B) Indian business leaders distrusted most European corporations C) political leaders enacted laws that targeted foreign firms for harassment D) Indian leaders feared the modern influences of American firms

C) political leaders enacted laws that targeted foreign firms for harassment

The U.S. Securities and Exchange Act encourages confidence in business transactions by ________. A) protecting public companies from government scrutiny B) evaluating the inner workings of privately owned firms C) requiring public companies to frequently disclose their financial status D) shielding investors from bankruptcy and excessive taxation

C) requiring public companies to frequently disclose their financial status

The Organisation for Economic Co-operation and Development (OECD) is classified as a(n) ________. A) international organization B) regional economic bloc C) special interest group D) competing firm

C) special interest group

Which of the following characterizes country risk? A) The political and legal systems of adjacent nations greatly impact the country risk of nations that host foreign firms. B) Country risk will change only after the creation of laws and regulations that affect foreign firms. C) A nation's country risk level remains fairly constant until the election and installation of a new political leader. D) Country risk is always present, but its intensity fluctuates over time and from country to country.

D) Country risk is always present, but its intensity fluctuates over time and from country to country.

Which of the following pairs of nations are on opposite ends of the political freedom scale? A) New Zealand and Chile B) China and Vietnam C) Japan and South Korea D) Cuba and Sweden

D) Cuba and Sweden

Which of the following statements is true of country risk? A) Its nature remains constant over time and across nations. B) Its intensity seldom varies over time and across nations. C) It is present only in poor nations. D) It is present in all nations

D) It is present in all nations

Islamic law is based on the ________. A) Bible B) Bhagavad Gita C) Tanakh D) Qur'an

D) Qur'an

Common law can best be described as a system ________. A) designed from political and legislative regulations B) derived from religious beliefs and moral values C) based on an all-inclusive system of laws that have been codified D) based on legal precedents set by the nation's courts

D) based on legal precedents set by the nation's courts

Which of the following is the LEAST adversarial method of resolving a contractual dispute? A) trial B) arbitration C) litigation D) conciliation

D) conciliation

Which of the following terms indicates a company's potential loss of profitability caused by a nation's political or legal setting? A) commercial risk B) currency risk C) cross-cultural risk D) country risk

D) country risk

Common and Civil Law (Scenario) Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term. 80) Which of the following statements is most likely applicable to Country B? A) local and national legislatures pass laws B) ethics and morality are the underlying tenets C) an all-inclusive system of law that has been codified D) detailed contracts that clearly state all potential contingencies

D) detailed contracts that clearly state all potential contingencies

Which of the following laws is responsible for the ban on cigarette advertisements in France? A) environmental laws B) product and liability laws C) foreign investment laws D) marketing and distribution laws

D) marketing and distribution laws

Which of the following terms refers to the existence of a legal system based on clear rules and fair enforcement? A) conciliation B) arbitration C) culture of law D) rule of law

D) rule of law

A(n) ________ is a type of trade penalty imposed on one or more countries by one or more other countries. A) confiscation B) expropriation C) subsidy D) sanction

D) sanction

A ________ government seeks to control not only all economic and political matters but also the attitudes, values, and beliefs of the citizenry. A) democratic B) socialistic C) mixed D) totalitarian

D) totalitarian

A democratic government seeks to control not only all economic and political matters but also the attitudes, values, and beliefs of the citizenry. T/F

False

A market economy is also called a centrally planned economy. T/F

False

Civil law is more flexible than the other legal systems T/F

False

Common law is also known as code law. T/F

False

Common law originated in the United States T/F

False

A foreign firm's entry strategy, operations, and performance are often dictated by foreign investment laws T/F

True

An embargo is an official ban on exports to or imports from a particular country. T/F

True

Civil law is primarily legislative in origin and based on laws passed by national and local legislatures T/F

True

Common law is primarily judicial in origin and based on court decisions T/F

True

Democracy is characterized by limited governmental interference T/F

True

Democracy is closely associated with openness T/F

True

Government agencies, institutions, and public officials influence the manner in which foreign firms conduct business. T/F

True

Host-country employees provide firms with information about country risks that might harm the firm and its international interests T/F

True

In a market economy, the government may intervene to address the inequalities that market economies sometimes produce T/F

True

The European Union impacts international trade and business because of its ability to enact and enforce laws and regulations T/F

True

The immediate cause of country risk is a legal or political factor. T/F

True