BADM 210 FINAL

How much money did it take the Arizona Bicycle Firm to move from Chinese to Taiwanese manufacturing?

$1,000,000

Lugnow Inc. paid a sum of $76,000 to an official in the government of Nepotismia to ensure that the company obtained exclusive preferential treatment. The $76,000 can be classified as

Bribe

Which of the following statements reflects the nature of the global economy of the twenty-first century?

Countries have extensively adopted liberal economic policies.

Which of the following refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization?

Ethics

Why has FDI grown more rapidly than world trade?

Executives of business firms see FDI as a way of circumventing future trade barriers.

A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.

False

A disadvantage of the euro is that the development of a pan-European, euro-denominated capital market will decrease the range of investment options open to both individuals and institutions.

False

A strong belief that economic progress leads to adoption of a totalitarian regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.

False

According to Geert Hofstede, high power distance cultures were found in societies that tried to play down inequalities of power and wealth as much as possible.

False

According to the product life cycle theory, as demand for a product starts to grow in other advanced countries, potential for exports from the United States will gradually increase.

False

As the only currency that could be converted into gold, the British pound occupied a central place in the fixed exchange rate system.

False

Assume that the euro/dollar exchange rate is €1 = $1.20. If it costs $36 to buy a European product, the stated price of the product would be €36.

False

Based on Hofstede's cultural dimensions, enterprises headquartered in a country which scores high on masculinity and power distance measures are more likely to behave ethically than enterprises headquartered in a culture where individualism and uncertainty avoidance are strong.

False

Class membership in the United States is determined to a much greater degree by individual background and schooling, as opposed to economic achievements.

False

Entrepreneurial individuals have fewer economic incentives to develop valuable new innovations in market economies than in planned economies.

False

In a free trade area, all barriers to the trade of goods and services among member countries are removed and a common external trade policy is adopted.

False

In recent decades, a fall in subsidies, quotas, and voluntary export restraints has been accompanied by a rise in tariff barriers.

False

One of the tenets of collectivism is that the welfare of society is best served by letting people pursue their own economic self-interest.

False

Political systems that emphasize collectivism tend to be democratic, while political systems that place a high value on individualism tend to be totalitarian.

False

Pressures for greater protectionism increased around the world during the 1980s and early 1990s due to the strain caused by the persistent trade deficit in the world's largest economy, Japan.

False

The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

False

The disadvantage of a pegged exchange rate regime is that it aggravates inflationary pressures in a country.

False

The experience curve refers to systematic increases in production costs that have been observed to occur over the life of a product.

False

The forward exchange rate refers to the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

False

The globalization of markets and production and the resulting growth of world trade, foreign direct investment, and imports all imply that firms are finding it easier to protect themselves from attack by foreign competitors.

False

The globalization of the world economy is having a negative effect on the volume of FDI.

False

The gross national income (GNI) per capita comes much closer to Amartya Sen's conception of how development should be measured than narrow economic measures such as Human Development Index (HDI).

False

Trade creation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

False

Under a floating exchange rate system, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

False

Under the gold standard, a country in balance-of-trade equilibrium will experience a net inflow of gold from other countries.

False

When the Bretton Woods participants established the World Bank, the need to lend money to third-world nations was foremost in their minds.

False

_________________________ is the US President that suspended the use of the Gold Standard during the Great Depression.

Franklin D. Roosevelt

Which of the following statements reflects an important trend in the changing nature of multinational enterprises?

International business is conducted not just by large firms but also by medium-size and small enterprises.

Which of the following statements is most likely to be true regarding private ownership?

It gives entrepreneurs an incentive to search for better ways of serving consumer needs.

Javier purchased an invention made by his friend to start a company that processes plastic bags into synthetic cloth.

Javier purchased an invention made by his friend to start a company that processes plastic bags into synthetic cloth.

Richard purchased a computer for $600 in 2015. Compared to the $900 computer that he had purchased back in 2011, the new one seems to be more efficient in terms of the price he has paid and the power of the microprocessor technology. This is best explained by

Moore's Law

Which of the following statements is true about culture?

Multinational enterprises can themselves be engines of cultural change.

In order to build large production units and expedite certain routine government actions related to this, Scorpius Inc. made legal payments to the government officials of a host nation. Such payments are typically referred to as

Speed Money

The United Republic emphasizes individual performance and achievements in every sphere of society. Which of the following statements is true about the society of this type of country?

The employees in this country will lack loyalty and commitment to a company.

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

True

A political union addresses the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations of an economic union.

True

According to Adam Smith, market mechanism, rather than government policy, should determine a country's imports and exports.

True

According to Alexander Hamilton, governments must temporarily support new industries until they have grown strong enough to meet international competition.

True

According to the Bretton Woods agreement, if a currency became too weak to defend, a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund.

True

According to the Utilitarian approach, the action that produces the greatest good for the greatest number of people can result in the unjustified treatment of a minority.

True

According to the World Values Survey, as countries get richer, a shift occurs away from "traditional values" linked to religion, family, and country, and toward "secular rational" values.

True

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

True

Consumer surplus captures some of the value of a product thereby reducing the price a firm can charge for it.

True

Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances.

True

Despite all the talk about the emerging global village, differences between countries, such as differences in cultures and political systems, can be very profound and enduring.

True

Economic theories suggest that free trade and investment is a positive-sum game, in which all participating countries stand to gain.

True

Given a common gold standard, the value of any currency in units of any other currency (the exchange rate) was easy to determine.

True

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.

True

If the law of one price were true for all goods and services, the purchasing power parity (PPP) exchange rate could be found from any individual set of prices.

True

Import tariffs protect domestic producers against foreign competitors.

True

In general, as countries get richer, they enact tougher environmental and labor regulations.

True

It can be very difficult for a small country to maintain a peg against another currency if capital is flowing out of the country and foreign exchange traders are speculating against the currency.

True

It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

True

Licensing is not a good option if the competitive advantage of a firm is based upon managerial or marketing knowledge that is embedded in the routines of the firm or the skills of its managers, and that is difficult to codify in a "book of blueprints."

True

One of the reasons for the trend toward greater protectionism during the 1980s and 1990s was that many countries found ways to get around GATT regulations.

True

Profit growth is measured by the percentage increase in net profits over time.

True

Societal business ethics are not divorced from personal ethics.

True

The Bretton Woods system could work only as long as the U.S. inflation rate remained low and the United States did not run a balance-of-payments deficit.

True

The Cold War was in many respects a war between collectivism, championed by the former Soviet Union, and individualism, championed by the United States.

True

The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business.

True

The Nobel Prize-winning economist Paul Samuelson argued that contrary to the standard interpretation, in certain circumstances the theory of comparative advantage predicts that a rich country might actually be worse off by switching to a free trade regime with a poor nation.

True

The World Trade Organization, the International Monetary Fund and its sister institution the World Bank, and the United Nations were all created by voluntary agreement between individual nation-states.

True

The benefits, costs, and risks associated with doing business in a country are dependent of that country's political, economic, and legal systems.

True

The emphasis on individualism may make it difficult to build teams within an organization to perform collective tasks.

True

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

True

The governments of China, Vietnam, and Laos are communist in name only because those nations have adopted wide-ranging, market-based economic reforms.

True

The purchasing power parity for different countries is adjusted (up or down) depending upon whether a country's cost of living is lower or higher than the cost of living in the United States.

True

The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.

True

The term ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization.

True

Under a floating exchange rate regime, market forces have produced a volatile dollar exchange rate.

True

Values provide the context within which a society's norms are established and justified.

True

Which of the following countries has seen a relative decline in its share of world output between 1960 and 2014?

United States

The currency of the country of Venadia falls sharply in value against the currency of Lutetia, a neighboring country. Which of the following is a consequence of this exchange rate movement?

Venadia's exports to Lutetia will increase, because Venadian goods will become cheaper in Lutetia.

The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary system—the International Monetary Fund (IMF) and the

World Bank.

As a result of _____, large amounts of economic activity in India are unrecorded and the official GDP figures of the country fail to tell the entire story of the economy.

active bartering

Which of the following characterizes the lowering of trade and investment barriers?

allows firms to base production at optimal locations outside their home country

The argument for unrestricted free trade is that both import controls and export incentives

are self-defeating and result in wasted resources.

Assume that the interest rate on borrowings in India is 1 percent while the interest rate on bank deposits in a U.S. bank is 6 percent. John, an active currency trader borrows in Japanese yen, converts the money into U.S. dollars and deposits it in a U.S. bank. John is engaging in

carry trade.

The needs of society as a whole are generally viewed as being more important than individual freedoms when the emphasis is on`

collectivism.

You can adjust GNI per capita by purchasing power to account for differences in the

cost of living

In 2014, if the PPP per capita of China was $13,170 and the PPP per capita of the United States was $55,860, this means that the

cost of living was lower in China.

Three countries, close to each other in the Pacific Rim, enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement?

customs union

Which of the following caused a decline in the dollar/yen carry trade during 2008-2009?

decrease in interest rate differentials as the U.S. rates came down

Which of the following identifies the motivation for much of the foreign direct investment by non-U.S. firms?

desire to disperse production activities to optimal locations

In a bid to compete better in a highly-competitive fitness products market, Omega is focusing primarily on increasing the attractiveness of its product. What Omega is doing is referred to as a

differentiation strategy.

Which of the following groups benefits the most from the imposition of tariffs?

domestic producers

If Argonia exports vast quantities of cheap toys to Cadmia, selling them at below their costs of production, it would constitute

dumping

When compared to American society, Japanese society lacks

dynamism and entrepreneurship.

The Foreign Corrupt Practices Act was subsequently amended to allow for speed money or grease payments, which are payments made to

ensure a business receives the standard treatment that it ought to receive.

Which of the following is a reason for the emergence of the gold standard?

expansion in the volume of international trade due to the Industrial Revolution

Moora and Trun, two countries that are part of the BURPHA common market have an exchange rate system where the values of their currencies are set against each other at a mutually agreed on exchange rate. Moora and Trun's exchange rate system is called

fixed

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of

foreign direct investment.

Which of the following enables organizations to conduct international trade without having to resort to barter?

foreign exchange market

Which of the following occurs when two parties agree to exchange currency and execute the deal at some specific date in the future?

forward exchange

The government of Murinca does not attempt to influence through quotas or duties what its citizens can buy from another country, or what they can produce and sell to another country. Which of the following terms best represents the situation in Murinca?

free trade

Which of the following is the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements?

free trade agreements

The countries of Mimbo, Juwan, and Ninot agreed to remove all barriers to the trade of goods and services among each other. However, the three countries agreed that each would be allowed to determine its own trade policies with regard to nonmembers. The economic integration among these three countries is a(n)

free trade area.

By lowering production costs, subsidies help domestic producers to

gain export markets.

Which of the following is most likely to involve establishment of a new operation in a foreign country?

greenfield investment

Due to certain strict environmental and employment standards in its home nation, Taurus Inc. has shifted its operations to developing nations. Hence, the firm has now been able to gain competitive advantage by avoiding costly pollution controls. This strategic move of Taurus Inc. will be considered

immoral

All of the following are issues of a country not manufacturing what it needs except:

increase in economic activity

For years, the world had used the country of Votnam as a place to assemble goods because of the country's availability of cheap labor. To shift its manufacturing base from simple assembly to full-fledged manufacture of components and finished goods, Votnam introduced a policy that 35 percent of the value of a product must be produced locally. This is an example of a(n)

local content requirement

Animax Limited got an order to sell 50,000 central processing units (CPUs) to Palladia, but the Palladian government stipulated that 15 percent of the component parts of those CPUs must be produced in Palladia. This stipulation by the Palladian government would be example of a(n)

local content requirement.

Which of the following is in a country's best interests, according to the main tenet of mercantilism?

maintaining a trade surplus

Which of the following refers to an economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced?

market

In the modern world, corporations can worsen the global tragedy of the commons by

moving production to locations where they are free to pump pollutants into the environment.

Silver Fire Electric Inc., a U.S.-based company, has productive activities in more than two countries. As a result, it would be most appropriate to refer to Silver Fire Electric as what type of enterprise?

multinational

Once it undertakes FDI, a firm becomes a(n)

multinational enterprise.

A black economy is most likely to be prevalent when

people engage in barter agreements to avoid paying taxes.

BERPHO, an economic union, wants to make a coordinating bureaucracy that is accountable to the citizens of member nations. What BERPHO wants to do is called a(n)

political union

The motive behind the high tariffs imposed by nations on imports of manufactured goods, prior to World War II, was to:

protect domestic industries from foreign competition.

Cadmia banned imports of Mattel toys with high levels of toxic lead, manufactured in Argonia. The underlying motive for such a move could be

protecting consumers from unsafe products.

Which of the following is most likely to be an objective of export tariffs?

reducing exports from a sector, often for political reasons

The six countries in the northern side of the Pacific Rim agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to as a

regional economic integration.

Which of the following refers to currency speculation?

short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates

In the context of social structure, American society is characterized by a low degree of

social stratification.

At the end of 2015, companies from the country of Erithrea collectively owned $37 billion in assets in its neighboring country of Outflowia. The $37 billion is Erithrea's _______ of FDI.:

stock

While the lowering of trade barriers made globalization of markets and production a theoretical possibility, which of the following has made it a tangible reality?

the advances in communication, information processing, and transportation technologies

A regional free trade agreement will benefit the world only if

the amount of trade it creates exceeds the amount it diverts.

Which of the following has seen a positive change from 1960 to 2014?

the share of world output accounted for by developing nations

The value of Omega's top selling fitness product to an average consumer is $150 and the average unit cost of producing that product is $65. In this scenario, $85 ($150-$65) represents

value creation.