IB 303 Exam 2 (Professor Ghinos)
why do nations export?
excess capacity profits and market share economies of scale mitigate risk old technology
Which statement accurately describes how personal ethics might be challenged in international transactions?
expatriate managers may face more pressure to violate their personal ethics
A company analyst is examining potential consumer markets around the world, finding that GDP per capita rates, as measured by Purchasing Power Parity (PPP), vary greatly around the world. According to the Heritage Foundation's Economic Freedom indices, countries with the highest GDPPC by PPP tend to be ________.
free
Utalitarian Approach
guided by what will result in the greatest good for the greatest number of people
Which two of Hofstede's dimensions are present in countries where ethical practices are commonly practiced?
high in individualism high in uncertainty avoidance
four main instruments of trade policy
import quotas local content requirements antidumping duties tariffs
Mercantilism
is the first theory of trade that advocated that a country should export more than it imports and should accumulate gold and silver to make up the difference and maintain a trade surplus.
why do nations import?
lack natural resources quality variety availability shortages
The stage in the product life cycle theory in which there is an increase in the importance of price as a competitive weapon is known as the __________.
maturity stage
capital account
measures inflow/out of capital to & from an economy (FDI)
current account
measures inflow/outflow of goods & services (imports & exports) Trade Surplus vs. Trade Deficit
The approach to trade in which countries try to run an export surplus to achieve a social or political objective is known as __________.
neomercantilism
The social rules and guidelines used to determine appropriate behavior in a particular setting are known as ______.
norms
Kantian Ethics
people should not be treated as machines! set of moral principles that should be applied to all humans regardless of context or situation. people have dignity and need to be respected as such
rights theories
recognizes that human beings have fundamental rights and privileges which transcend national boundaries and cultures
noblesse oblidge
refers to the moral obligation to act in an honorable and benevolent manner
An analyst at a New York-based insurance company is investigating a potential developing country for potential operations. The industry analysis indicates that the country's insurance market has a high number of restrictions on operations, limiting efficiency and sacrificing productivity. This economic action is known as ________.
regulation
facilitating payments
small amounts of money demanded by minor officials to perform their regular duties. different from bribes in that they're offered or solicited in return for a service a person or a company is entitled to receive. they are payments to ensure receiving the standard treatment that a business ought to receive from a foreign government but may not due to the obstruction of a foreign official
specific tariff
tariff levied as a fixed charge for each unit of good imported. $0.25 per pound of meat
tariffs
taxes on imports, raise governments revenues raises costs of imports relatives to domestic products pro producer, anti consumer (for home country)
the friedman doctrine
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law
The theory that large countries usually depend less on trade than small ones is known as the __________.
theory of country size
two characteristics of countervailing duties
they are a special tariff they are substantial and stay in place for 5 years
Anti-dumping policies
used to protect domestic producers from unfair competition countervailing duty: import tax to prevent dumping, also used to counter subsidies. Sanctioned by WTO as a way of neutralizing negative effects
greenfield projects
•(build from the ground up) •No available acquisition •Local government requirements •Strong incentives - $$$
acquisitions
•Acquisitions (one firm purchases another company's shares) •Marriot purchased AC Hotels (Spanish brand), Protea Hotels (S. African)
local content requirement (non tariff barrier)
•Government policies that require part of a product to be produced domestically (quantity, or value add)
FDI impact on HOME country
•Industry •Stockholders •Employees •Customers •Suppliers •Government - Balance of Payments •Current Account, Capital Account Society at large (i.e., environment
why do firms invest outside their home country?
•Issues with exporting/importing (barriers, costs) •Issues with licensing (risky, tough to duplicate value-add, control issues) •No excess domestic capacity •Follow customers and/or competitors (i.e., Bridgestone buys Firestone) •Consumer imposed restrictions (Made in America...) •Efficiencies (least cost location) •Leverage global scale (i.e., merger between Fiat Chrysler & Peugeot S.A.) •Vertical integration (i.e., pipelines & distribution like Citgo & BP) access to key factors and knowledge: capital markets, marketing information, natural resources, raw mats technology, R and D
WTO-most favored nation clause
•Main pillar of multi-lateral trading system •Ensures non-discrimination between members •If nation grants advantage to one member, must give to all members •May also be granted to certain developing nations
mergers
•Mergers (agreement to unite two firms into a new company) •Dr. Pepper Snapple Group •Fiat Chrysler will become Stellantis after merging with PSA Group (Peugeot)
FDI Incentives for investing outside of home country
•Tax benefits •Services and utilities discounts •Attractive accounting laws •100% ownership rights •No restrictions on capital repatriation •Financial grants •Tariff exemptions
Which of the following is NOT an example of government intervention in a mixed economy? -A national government controls all resources. -A national government redistributes income and wealth in order to pursue an equity objective, by creating socialized medicine or welfare programs. -A state government owns some of the means of production, for example for electricity. -A local government owns some of the means of production, for example for water purification. -A national government influences private production by buying goods or services.
-A national government controls all resources.
Which of the following is NOT a type of economic system? -Command economy -Mixed economy -Democratic economy -State capitalist economy -Market economy
-Democratic economy
Which of the following is NOT a characteristic of free-market capitalism? -Free-market capitalism promotes free choice -Free-market capitalism denies government involvement. -Free-market capitalism promotes private ownership. -Free-market capitalism promotes a laissez-faire mentality. -Free-market capitalism promotes government involvement.
-Free-market capitalism promotes government involvement.
According to the U.N.'s classification of economies, a developing economy is characterized by all of the following EXCEPT: -trade restrictions -narrow market activity -resistance to foreign ownership -fragile political institutions -limited infrastructure
-fragile political institutions
According to the U.N.'s classification of economies, a transition economy is characterized by all of the following EXCEPT: -heavy indebtedness -inefficient capital movement -poorly performing markets -ongoing conflict -poverty
-inefficient capital movement
Which of the following is NOT an economic factor affecting international business activities? -Degree of freedom -type of environment -orientation of system -type of operation -drivers of performance
-type of operation
Between 1999 and 2001, Ecuador lost almost 10,000 teachers when they moved to other countries. Which term BEST describes this movement?
A brain drain
foreign direct investment
A business from one country invests directly in another country, or owns a foreign entity •Not just production! (marketing, sales, support services, training...) •US Department of Commerce defines FDI as owning at least 10% interest •> 50% ownership assures managerial control (Impacts decision making: capital, patents, trademarks, know-how) •Portfolio investment - no managerial control
Which of the following supports the idea of a company with a green economics focus?
A company is concerned with how it is affecting the environment.
Voluntary Export Restraint (VER)
A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.
Which of the following is NOT likely to result in an increase in the mobility of people?
An increase in minimum wage in one's home country
product life cycle
As products mature, locations of sales and optimal production will change. As product becomes more standardized and price becomes main selling driver, production will shift to lower-cost locations.
An analyst in a Toronto, Canada-based multinational is examining the economic environment of a developing country where a manufacturing firm might be located. The analyst is investigating the country's trade and financial transactions which were conducted by all the individuals, business, and government agencies in that country, compared to the rest of the world, over the last year. The analyst is examining which of the following?
Balance of Payments
Entity List
Bans certain companies from acquiring xyz without government approval
FDI impact on host country
Benefits •Employment*, capital, tax revenue, training, technology •Economic catalyst, confidence builder, balance of payment effects •Capital Account: • Money flowing in (positive) • Firm repatriating funds (negative) •Current Account: • Fewer imports and possibly more exports (positive) Costs •Competition, resource exploitation, political & economic influence, repatriated profits, opportunity cost (labor, capital), environmental impact, national security
What is the extent of unethical behavior by firms in the form of bribes paid to gain preferential treatment?
Bribery in the global marketplace amounts to about $1 trillion annually.
American entrepreneurs have the freedom to start a business, operate it as they see fit, and close the business if they aren't satisfied with its performance. Which kind of freedom do these entrepreneurs enjoy?
Business freedom
The International Division VP of a Paris-headquartered multinational company is evaluating the risk to the firm of a rapid increase in the cost of living in a developing company in which the French firm has operations. This scenario illustrates which of the following economic indicators?
Chronic or hyperinflation
Heckscher-Ohlin Theory
Comparative advantage is the result of differences in national factor endowments. Predicts that nations will export goods that make intensive use of locally abundant factors. advocates for unrestricted free trade
Which of the following would NOT be considered a nontradable good?
Corn
A U.S. company develops a product for its domestic market. It then tries to sell the product in Europe. This demonstrates which of the following trade theories?
Country-similarity theory
what is cultural relativism
Cultural relativism is a straw man approach which states that ethics are nothing more than the reflection of a culture.
An industry researcher has discovered that people from Indiana tend to prefer wine over other alcoholic beverages, but that the Indiana climate is not generally favorable to wine production, particularly compared to California, Australia, or France, and that there are few local wineries. In this example, which of the following conditions is met for industry favorability?
Demand conditions
Which theory suggests that Switzerland might be an excellent area in which to start a high technology firm due to the high levels of human capital, extensive structure of existing companies in the arena, high levels of consumer demand, and network of related and supporting industries?
Diamond of national advantage
The right for people to work, produce, consume, save, and invest in a way that they want is known as which of the following?
Economic freedom
The U.S. government has estimated that there are 50 million legal or illegal immigrants currently living in the country. Many of these individuals emigrated in order to increase their wages/salaries. This is an example of what motivation?
Economic motivation
government imposed restrictions on services
Essentiality: communications, domestic transport Not-for-profit: mail, health, education Standards: licensing for professionals Immigration-related: officers, civil servants
A company that seeks to develop and sustain a competitive advantage over its competition sees few competitors in its industry. Which facet of the diamond of national competitive advantage does this situation involve?
Firm strategy, structure, and rivalry
In certain regions of Italy, there are a large number of small, often family-owned firms that produce high quality apparel and footwear for the luxury market. In this example, which of the following conditions is met for industry favorability?
Firm strategy, structure, and rivalry
Which congressional act outlaws the payment of bribes to foreign government officials to gain businesses? Multiple choice question.
Foreign Corrupt Practices act
Porter's Diamond of National Competitive Advantage
Four attributes explain why a nation dominates in the production and export of products. Chance & government policy influence attributes. 1) Factor endowments 2) Demand conditions 3) Supporting industries 4) Firm rivalry
The Organization for Economic Cooperation and Development is an example of which of the following types of initiatives striving to slow the pace of bribery and corruption?
Global initiative
You are trying to determine the total value of all the goods and services produced within your nation's boundaries, regardless of whether they are from foreign- or domestic-owned companies. Select the BEST means of measurement.
Gross domestic product
government policy instruments and FDI
HOME COUNTRY •Encourage: insurance programs, loans, no double taxation •Restrict: tax rules, political reasons (China) HOST COUNTRY •Encourage: incentives (Select USA) •Restrict: ownership limits, exclude certain sectors, performance requirements
You work for a company located in France. Employees in your company make less money than employees in similar companies located in the United States. However, employees in your company have more leisure time and report having more satisfaction with their lives than their U.S. counterpart. This scenario illustrates which of the following?
Happynomics
harmonized system
Internationally standardized system of names and numbers to classify traded products.
An entrepreneur based in a developing country establishes a company to manufacture a completely new product for a growing market but realizes that he will need to provide evolving product characteristics and work to short production runs. In this example, the product is likely to be at what stage of its life cycle?
Introduction
Which of the following is true of the Siemens bribery scandal?
It seemed to be a long-term pattern.
A company analyst is calculating the amount of output per employee, as an input to future strategic planning. This is a calculation of which of the following?
Labor productivity
four determinants of ethical behavior
Leadership Societal culture Organizational culture Personal ethics
According to the theory of country size and trade, which of the following would depend MOST on trade?
Luxembourg
You live in France. Your country was not as hard hit as the United States by the financial crisis because it had many free market elements, but it also had a very strong social safety net. Which kind of economic system do you live under?
Mixed economy
absolute advantage
Nations should produce & export products that they can produce MORE efficiently than other nations. Trade is a positive-sum game. takes fewer resources to make supports unrestricted free trade
comparative advantage
Nations should produce & export products that they can produce MOST efficiently, even if they have an absolute advantage in producing all products. Trade is a positive-sum game. lowest opp cost is what you have a comparative advantage in.
New Trade Theory
Nations specialize in, produce and export products because in certain industries, world markets can support only a limited number of firms. Trade patterns reflect a nation's firm's ability to capture First Mover Advantage. (Nations can benefit from trade even when they don't differ in resource endowments or technology.) strategic trade policy
China seems to be focusing all of its economic efforts on export in order to gain a socio-political advantage. Which of the following approaches to trade does China appear to be adhering to?
Neomercantilism
the righteous moralist
One who claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries
six determinants of ethical behavior
Personal ethics Decision making processes Organizational culture Unrealistic performance goals Leadership Societal culture
According to Fortune magazine, in the shantytown of Dharavi, outside of Mumbai, India, approximately 85 percent of the households have a television. This example illustrates which of the following?
Potential for the Base of the Pyramid
quotas
Protects domestic production & jobs FDI bargaining tool Enforced with an import license
A government decides to start printing money in order to stimulate demand for goods and services. This demonstrates which of the following economic features?
Reflation
According to the theory of geographic distance and economic trade, which of the following countries is Latvia MOST likely to trade with?
Russia
A basketball player is the best rebounder on her team and the best scorer in the entire league. Which is her comparative advantage?
Scoring
After the global financial crisis, countries that favored larger state presence, higher taxes, strong regulations, and more generous social welfare programs dealt successfully with market disruptions. These countries used which type of economic system?
Socialist
Which system has private companies making products for international markets whose behavior is tightly controlled by the government?
State capitalism
non-tariff barriers
Subsidies Import Quotas and Voluntary Export Restraints (VERs) Export tariffs and bans Antidumping duties (countervailing duties) Local content requirements Administrative policies
Two countries have trade restrictions so production factors begin to move between the countries. Which term BEST describes this situation?
Substitution
Economic activity that meets the needs of the present without compromising the future is known as which of the following?
Sustainable development
According to the theory of country similarity, which of the following countries would you expect to trade MOST with Norway?
Sweden
Which of the following BEST describes an absolute advantage?
The United States produces wheat more efficiently than Costa Rica does.
Which of the following is likely to make it difficult for companies like Siemens as they work to maintain ethical organizational cultures in the future?
The company may find it hard to avoid unethical business practices when it sees foreign competitors still engaging in unethical practices.
Which of the following shows a product that is in the growth stage of its product life cycle?
The innovating company has competitors among developed countries but not undeveloped countries.
When was migration identified as a major engine of globalization?
The late 19th century, the early 20th century, and the current time
Neo-mercantilism
Theory of some nations that big trade surpluses make them rich. Seeing this with China, developing a huge trade surplus by mainly exporting, amassing large amounts of gold, which gives them power over developing nations government intervention supported
Which of the following is not a reason that is commonly used to explain why it is difficult to enforce regulations against unethical business practices? -American companies complain that they can't compete with foreign companies that are not restricted from paying bribes to win contracts. -Some of the countries in which organizations operate have a history of high levels of public corruption. -Internal business cultures of unethical behavior in a country can be difficult to change. -There are no organizations or laws that track illicit behavior, so there is no way to know which organizations are behaving unethically.
There are no organizations or laws that track illicit behavior, so there is no way to know which organizations are behaving unethically.
Which of the following countries is classified as "mostly free" on the Economic Freedom Score?
United States
You work in a country whose economy demonstrates low inflation, high employment rates, and open trade policies. According to the economic system test, where does your economy stand?
Your economy is successful.
apartheid
a policy or system of segregation or discrimination on grounds of race. was institutionalized, basically a political culture
ad volarem tax
a tax levied according to value. 5% of total value of goods taxed
An advantage to trade that consists of either product or process technology is known as __________.
acquired advantage
straw man approach
approaches that deny the value of business ethics or apply the concept in an unsatisfactory way
Naive Immoralist
asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
Why do governments intervene in trade, economic arguments
balance of payments revenue generation infant industries export led growth attract FDI control prices dumping first mover advantage
Researchers at Duke University recently documented that almost half of the United States' high technology start-ups, with tremendous growth potential, are founded or co-founded by immigrants, often with high levels of human capital. By contrast, the immigrants' home countries might not ever benefit from these potentially productive resources. For the immigrants' home countries, this phenomenon is known as __________.
brain drain
An economics professor advocates an economic system that is characterized by a free market, with extensive private ownership and control. This economic system is known as ________.
capitalism
In some hospitals in Nevada and Texas, Emergency Room (ER) scribes act as a physician's personal assistant and document each patient's visit. The scribes generally work with one ER physician per shift and are believed to make the physician (and the ER) more efficient. This example illustrates the theory of __________.
comparative advantage
Why do we act unethically?
decision making process personal ethics leadership unrealistic performance goals organizational culture
Leon Sullivans Six Principles to govern US Investments in South Africa
elimination of workplace discrimination equal and fair employment practices for all employees initiation and development of training practices pay equality increase number of blacks/non whites in management roles
