International Business Exam

The term _____ refers to the values and norms that are shared among employees of an organization.

organizational culture

Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are _____ and performance requirements.

ownership restraints. Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are ownership restraints and performance requirements. The other items listed are all common forms of incentives governments offer to foreign firms to invest in their countries.

The benefits, costs, and risks associated with doing business in a country are a function of that country's

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

A lobbyist from California argues that the U.S. government needs to protect the U.S. semiconductor industry from foreign competition. She argues that semiconductors are now such important components of defense products that it would be dangerous to rely primarily on foreign producers for them. This is an example of a(n) _____ argument for government intervention.

political. Countries sometimes argue that it is necessary to protect certain industries because they are important for national security. Defense-related industries often get this kind of attention (e.g., aerospace, advanced electronics, and semiconductors). Although not as common as it used to be, this political argument is still made. Those in favor of protecting the U.S. semiconductor industry from foreign competition, for example, argue that semiconductors are now such important components of defense products that it would be dangerous to rely primarily on foreign producers for them.

Deregulation involves the establishment and operation of private enterprises.

True. Deregulation involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

Direct effects arise when a foreign MNE employs a number of host-country citizens.

True. Direct effects arise when a foreign MNE employs a number of host-country citizens.

Most of the world's ethical systems are the product of religions.

True. Ethical systems refer to a set of moral principles, or values, that are used to guide and shape behavior. Most of the world's ethical systems are the product of religions.

Social Democrats

The communists believed that socialism could be achieved only through violent revolution and totalitarian dictatorship, whereas the social democrats committed themselves to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship.

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 Chinese petroleum company sets up a crude oil refining facility in Vietnam. This is an example of a greenfield investment.

True. A greenfield investment involves the establishment of a new operation in a foreign country.

A mudarabah contract of Islamic banks is similar to a profit-sharing scheme.

True. 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.

According to the radical view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

True. According to the radical view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior.

True. Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward people who engage in ethical behavior and sanction those who do not.

Porter argues that a nation's firms should

adopt policies that promote strong competition within domestic markets.

A number of econometric studies have found consistent evidence of a hump-shaped relationship between income levels and pollution levels. According to this as an economy grows and income levels rise

after a while the pollution levels decrease.

In a pure command economy

all businesses are owned by the state. In a pure command economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold. In addition, in a pure command economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.

According to the _____, international production should be distributed among countries according to the theory of comparative advantage.

free market view. The free market view argues that international production should be distributed among countries according to the theory of comparative advantage. Countries should specialize in the production of those goods and services that they can produce most efficiently.

In the case of command economies, deregulation involves _____.

removing price controls. Deregulation in these cases involved removing price controls, thereby allowing prices to be set by the interplay between demand and supply; abolishing laws regulating the establishment and operation of private enterprises; and relaxing or removing restrictions on direct investment by foreign enterprises and international trade.

The rise of mini-multinationals means that:

small businesses are becoming increasingly involved in international trade and investment.

The _____ committed themselves to achieving socialism without resorting to violent revolution and dictatorship.

social democrats

Which of the following theories proposes that a country should specialize in producing those goods for which it has an absolute advantage?

Adam Smith's theory

Collectivisim

Advocacy of collectivism can be traced to the ancient Greek philosopher Plato (427-347 BC), who in "The Republic" argued that individual rights should be sacrificed for the good of the majority and that property should be owned in common.

Which of the following is true regarding international businesses?

All MNEs are international businesses.

Which of the following statements is true regarding an international business?

An international business must find ways to work within the limits imposed by government intervention.

Which of the following philosophies can be traced back to the ancient Greek philosopher Plato?

Collectivism

What is the main reason that managing an international business differs from managing a domestic business?

Countries differ in their cultures and systems.

Critics of globalization argue that if proponents of globalization were correct about the supposed benefits associated with free trade and investment then which of the following would have happened?

Factories based in Mexico would not be cleaner

Which of the following has enabled globalization of markets?

Falling barriers to cross border trade

New trade theorists argue that getting a first-mover advantage is not a significant determinant of international trade

False

The new trade theory stresses that countries should have favorable factor endowments to excel in the production of a good

False

In the 1986 Uruguay Round, GATT members sought to write rules for promoting which of the following?

GATT's monitoring and enforcement mechanisms. In the Uruguay Round, member countries sought to extend GATT rules to cover trade in services. They also sought to write rules governing the protection of intellectual property, to reduce agricultural subsidies, and to strengthen the GATT's monitoring and enforcement mechanisms.

Which of the following is true about planned economies?

In a planned economy, the state owns all means of production. In a planned economy, the state owns all means of production. Consequently, entrepreneurial individuals have few economic incentives to develop valuable new innovations, because it is the state, rather than the individual, that captures most of the gains.

Which of the following is a consequence of globalization?

Increasing outsourcing of services

_____ refers to a philosophy that a person should have freedom in his or her economic and political pursuits.

Individualism

_____ is also known as the market imperfections theory.

Internalization theory. Internalization theory is also known as the market imperfections approach. It seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Which of the following is true of the IMF?

It has emerged as a significant player in the global economy.

Which of the following is a disadvantage of a high degree of managerial mobility between companies?

Lack of loyalty and commitment to an individual company. Although moving from company to company may be good for individual managers who are trying to build impressive résumés, it is not necessarily a good thing for American companies. The lack of loyalty and commitment to an individual company, and the tendency to move on for a better offer, can result in managers who have good general skills but lack the knowledge, experience, and network of interpersonal contacts that come from years of working within the same company.

_____ help establish the culture of an organization and set the example that others follow.

Leaders. Leaders help to establish the culture of an organization, and they set the example that others follow.

_____ involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold.

Licensing. Licensing involves granting a foreign entity (the licensee) the right to produce and sell the firm's product in return for a royalty fee on every unit sold.

Which of the following factors hinders globalization of consumer goods market?

National differences in tastes and preferences

_____ 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.

Paul Krugman. 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. A country that attempts to use such policies will probably provoke retaliation.

Which of the following argues that when a rich country enters into a free trade agreement with a poor country the poor country benefits more that the rich country?

Paul Samuelson critique

_____ are controls over the behavior of the MNE's local subsidiary. The most common of these are related to local content, exports, technology transfer, and local participation in top management.

Performance requirements. Performance requirements are controls over the behavior of the MNE's local subsidiary. The most common performance requirements are related to local content, exports, technology transfer, and local participation in top management.

Which of the following argues that it is in a country's best interests to maintain a trade surplus?

Principle of mercantilism

Which of the following is a feature of right-wing totalitarianism?

Provision of partial individual economic freedom along with restricted individual political freedom.

_____ is the extortion of income or resources of property holders by public officials such as politicians and government bureaucrats.

Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders.

Which of the following theories explains global trade in terms of the international differences in labor productivity?

Ricardo's theory of comparative advantage

Right-wing totalitarianism

Right-wing totalitarianism generally permits some individual economic freedom but restricts individual political freedom, frequently on the grounds that it would lead to the rise of communism.

_____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

Strategic trade policy. According to the strategic trade policy argument, a government should use subsidies to support promising firms that are active in newly emerging industries.

Which of the following was established to maintain order in the international monetary system?

The IMF

Which of the following is focused on making low-interest loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments?

The World Bank

Which of the following is true about the economic risks of doing business in a country?

The inflation rate in a country is an indicator of the economic risks of doing business in a country. One visible indicator of economic mismanagement tends to be a country's inflation rate. Another is the level of business and government debt in the country.

Individualism

The opposite of collectivism, individualism refers to a philosophy that an individual should have freedom in his or her economic and political pursuits.

Managing an international business is different from managing a purely domestic business for which of the following reasons?

The range of problems confronted are wider and more complex.

Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). Which of the following is a likely consequence of these barriers?

This may put a firm at a competitive disadvantage to indigenous competitors in that country. Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). This may put a firm at a competitive disadvantage to indigenous competitors in that country.

Which of the following is an impediment that makes it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe?

Transportation costs

Paul Samuelson's critique looks at what happens when a rich country enters into a free trade agreement with a poor country

True

Underlying most trade theories is the notion that different countries have particular advantages in different productive activities

True

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

True. Hofstede's uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.

In which of the following situations would FDI deteriorate the current account of the host country's balance of payments?

When a foreign subsidiary imports a substantial number of its inputs from abroad. A concern arises when a foreign subsidiary imports a substantial number of its inputs from abroad, which results in a debit on the current account of the host country's balance of payments.

Most economists would probably argue that the best interests of international business are served by

a free trade stance. Most economists would probably argue that the best interests of international business are served by a free trade stance, but not a laissez-faire stance. It is probably in the best long-run interests of the business community to encourage the government to aggressively promote greater free trade by, for example, strengthening the WTO. Business probably has much more to gain from government efforts to open protected markets to imports and foreign direct investment than from government efforts to support certain domestic industries in a manner consistent with the recommendations of strategic trade policy.

Free trade refers to a situation where _____

a government does not try to influence what its citizens can buy from global markets

The downside of increased globalization is:

a severe crisis in one region can affect the entire globe.

Indulgence refers to

a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Hofstede again presented results and theoretical rationale to support the indulgence versus restraint dimension. Indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms.

Values are

abstract ideas about what a group believes to be good, right, and desirable. Values refer to abstract ideas about what a group believes to be good, right, and desirable. Put differently, values are shared assumptions about how things ought to be.

In industries where economies of scale are important

both the variety of goods that a country can produce and the scale of production are limited by the size of the market, False

In Samuel Huntington's thesis, global terrorism is a product of the _____.

clash of value systems and ideology. In Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.

Historically, command economies were found in _____, where collectivist goals were given priority over individual goals.

communist countries. Historically, command economies were found in communist countries where collectivist goals were given priority over individual goals. Since the demise of communism in the late 1980s, the number of command economies has fallen dramatically.

Innovation and entrepreneurial activity help increase economic activity by

creating new products and markets. Innovation and entrepreneurial activity help increase economic activity by creating new products and markets that did not previously exist. Moreover, innovations in production and business processes lead to an increase in the productivity of labor and capital, which further boosts economic growth rates.

From an international business perspective, some argue that what is ethical

depends on one's cultural perspective. From an international business perspective, some argue that what is ethical depends on one's cultural perspective.

The role of the government in a market economy involves

encouraging vigorous free and fair competition among private producers. The role of government in a market economy is to encourage vigorous free and fair competition between private producers. Governments do this by outlawing restrictive business practices designed to monopolize a market (antitrust laws serve this function in the United States).

This refers to a set of moral principles, or values, that are used to guide and shape behavior.

ethical system. Most of the world's ethical systems are the product of religions.

To make sure that a business behaves in an ethical manner, a number of companies have hired _____, who are responsible for making sure the company's code of ethics is followed in every business decision.

ethics officers. To make sure that a business behaves in an ethical manner, a number of firms now have ethics officers. These individuals are responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the business decision-making process, and that the company's code of ethics is followed.

The belief in the superiority of one's own culture is known as

ethnocentrism. 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.

Factor endowments refer to the

extent to which a country is gifted with such resources as land, labor, and capital.

Amazon.com was the earliest, major online bookstore, which allowed it to generate brand awareness and have a significant presence in the market. Amazon.com had a head start on later entrants to the online bookstore market. In this example, Amazon.com has _____.

first-mover advantages. First-mover advantages are the advantages that accrue to early entrants into a market. In the language of business strategy, early entrants into potential future economic stars may be able to reap substantial first-mover advantages, while late entrants may fall victim to late-mover disadvantages.

The lack of progress in the Doha Round negotiations has resulted in countries

forging ahead with their own bilateral agreements. In response to the apparent failure of the Doha Round negotiations to progress, many nations have pushed forward with bilateral trade agreements. These include the United States and the EU, which in 2013 launched bilateral talks aimed at reducing trade barriers between them.

A subsidy is a

government payment to a domestic producer. A subsidy is a government payment to a domestic producer. Subsidies take many forms, including cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms.

Countries with free market economies in which property rights are protected tend to have _____ than command economies or economies where property rights are poorly protected.

greater economic growth rates. Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than command economies or economies where property rights are poorly protected.

A U.S. investment firm Fin-Smart set up a customer service call center in India to take advantage of the lower labor costs. This is called ____.

international outsourcing

The common law system

is based on tradition, precedent, and custom. This gives a common law system a degree of flexibility that other systems lack.

Supporters of globalization maintain that the apparent decline in real wage rates of unskilled workers:

is due to technological changes that create greater demand for skilled workers.

Ad valorem tariffs are

levied as a proportion of the value of the imported good. Ad valorem tariffs are levied as a proportion of the value of the imported good. In most cases, tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods.

The threat of antidumping action affects a firm by

limiting its ability to use aggressive pricing to gain market share in a country. The threat of antidumping action limits the ability of a firm to use aggressive pricing to gain market share in a country. Firms in a country also can make strategic use of antidumping measures to limit aggressive competition from low-cost foreign producers.

If China continues to move toward greater free market reforms they:

may move from third-world to industrial superpower status.

If General Electric, a U.S. based corporation, purchases a 12 percent interest in a company in Italy, that purchase would be an example of a(n) _____.

minority acquisition. Acquisitions can be a minority (where the foreign firm takes a 10 percent to 49 percent interest in the firm's voting stock), majority (foreign interest of 50 percent to 99 percent), or full outright stake (foreign interest of 100 percent).

During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments that were typically _____ than their predecessors had been.

more committed to free market capitalism. During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments that were typically more committed to free market capitalism than their predecessors had been.

The volume of world trade in merchandise growing faster than world GDP implies that:

more firms are dispersing their production processes to global locations

Five airlines control 90 percent of the aviation sector of a country. The aviation industry in the country would be an example of a(n) _____.

oligopoly. An oligopoly is an industry composed of a limited number of large firms (e.g., an industry in which four firms control 80 percent of a domestic market would be defined as an oligopoly).

The _____ is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost.

pragmatic nationalist view. The pragmatic nationalist view is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost. When a foreign company rather than a domestic company produces products, the profits from that investment go abroad. Many countries are also concerned that a foreign-owned manufacturing plant may import many components from its home country, which has negative implications for the host country's balance-of-payments position.

The _____ theory argues that such advanced nations as the United States have an incentive to develop consumer products and hence such nations tend to produce newer products

product life-cycle

United Nations has developed the Human Development Index (HDI) to measure the

quality of human life in different nations. Amartya Sen's influential thesis has been picked up by the United Nations, which has developed the Human Development Index (HDI) to measure the quality of human life in different nations.

Proponents of globalization and reduced trade restrictions would argue that they are largely responsible for:

reducing by half the number of people living in extreme poverty five years ahead of the U.N.'s goal.

Moral imagination refers to

standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder. Stakeholder analysis involves a certain amount of what has been called moral imagination. This means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.

General Motors' stand against apartheid in South Africa was based upon what came to be known as _____.

the Sullivan principles. GM adopted what came to be called the Sullivan principles, named after Leon Sullivan, a black Baptist minister and a member of GM's board of directors. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as two conditions were fulfilled. First, the company should not obey the apartheid laws in its own South African operations (a form of passive resistance). Second, the company should do everything within its power to promote the abolition of apartheid laws.

It has been argued that the success of Japanese enterprises in the global economy has been based partly on which of the following

the cooperation between a company and its suppliers on issues such as design, quality control, and inventory reduction. Some argue that the success of Japanese enterprises in the global economy has been based partly on their ability to achieve close cooperation between individuals within a company and between companies. The primacy of the value of group identification also discourages managers and workers from moving from company to company.

The relative decline of the United States in the share of world output and world exports reflects?

the growth in the economic development of the world economy.

Throughout the 1990s the amount of foreign direct investment directed at both developed and developing nations increased dramatically. This trend reflects:

the increasing internationalization of business corporations.

Hofstede's masculinity versus femininity dimension examined

the relationship between gender and work roles. Hofstede's masculinity versus femininity dimension looked at the relationship between gender and work roles.

Folkways are

the routine conventions of everyday life. Folkways are the routine conventions of everyday life. Generally, folkways are actions of little moral significance.

A legal system based on religious teachings is called a _____.

theocratic law system. A theocratic law system is one in which the law is based on religious teachings. Islamic law is the most widely practiced theocratic legal system in the modern world, although usage of both Hindu and Jewish law persisted into the twentieth century.

Newly privatized entities often have little incentive to restructure their operations to become more efficient when

they continue to receive subsidies from the state. Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment.

Constant returns to specialization occurs when

units of resources remain stable for any number of goods produced.

If Porter's theory is correct

we would expect his model to predict the pattern of international trade that we observe in the real world For example, countries should be exporting products from those industries where all four components of the diamond are favorable.

Which of the following statements is true about caste system?

A caste system is a rigid form of social stratification. The most rigid system of stratification is a caste system. 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.

Which of the following exemplifies privatization?

A country sells its postal services to a consortium of companies that runs it as a profit making venture without any state funding. Privatization transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction.

Which of the following is a more attractive place to do business?

A nation with a market-based economic system. Other things being equal, a nation with democratic political institutions, a market-based economic system, and strong legal system that protects property rights and limits corruption is clearly more attractive as a place in which to do business than a nation that lacks democratic institutions, where economic activity is heavily regulated by the state, and where corruption is rampant and the rule of law is not respected.

The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery. What is this an example of?

An ethical dilemma. The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery, and therefore unethical, particularly if the gifts are substantial. This is a business-oriented example of an ethical dilemma.

According to the findings of the World Values Survey

As countries get richer, there seems to be a shift from survival values to well-being values. As countries get richer, there seems to be a shift from "traditional" to "secular rational" values, and from "survival values" to "well-being" values.

Which of the following is true with respect to multinational firms?

Because of their pivotal role in international trade, firms can and do exert a strong influence on government policy toward trade. Because of their pivotal role in international trade, firms can and do exert a strong influence on government policy toward trade. This influence can encourage protectionism, or it can encourage the government to support the WTO and push for open markets and freer trade among all nations. Government policies with regard to international trade can have a direct impact on business.

_____ are the accepted principles of right or wrong governing the conduct of businesspeople.

Business ethics. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is a strategy, or course of action, that does not violate these accepted principles.

What is the most widely practiced religion in the world?

Christianity is the most widely practiced religion in the world. The vast majority of Christians live in Europe and the Americas, although their numbers are growing rapidly in Africa.

The _____ benefits inefficient farmers and the politicians who rely on the farm vote, but not consumers in the European Union, who end up paying more for their foodstuffs.

Common Agricultural Policy (CAP). The European Union's support for the Common Agricultural Policy (CAP), which arose because of the political power of French and German farmers, is an example. The CAP benefits inefficient farmers and the politicians who rely on the farm vote, but not consumers in the EU, who end up paying more for their foodstuffs.

Contracts drafted under a common law framework tend to be

Contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. In civil law systems, however, contracts tend to be much shorter and less specific because many of the issues are already covered in a civil code. Thus it is more expensive to draw up contracts in a common law jurisdiction, and resolving contract disputes can be very adversarial in common law systems. But common law systems have the advantage of greater flexibility and allow for judges to interpret a contract dispute in light of the prevailing situation.

What is the concept of understanding how cultural differences across and within nations can affect the way business is conducted?

Cross-cultural literacy. By cross-cultural literacy, we mean an understanding of how cultural differences across and within nations can affect the way business is practiced.

Which account keeps track of the export and import of goods and services in a country?

Current account. The current account tracks the export and import of goods and services.

Identify the correct statement regarding the direction of FDI inflows.

Developed nations still account for the largest share of FDI inflows. Even though developed nations still account for the largest share of FDI inflows, FDI into developing nations has increased.

What are first-mover advantages?

Economic and strategic advantages that accrue to early entrants into an industry.

What is the term for unit cost reductions associated with a large amount of output?

Economies of scale

Which of the following is an ill antiglobalization protestors assign to globalization?

Environmental degradation

A civil law system tends to be more adversarial than a common law system.

False. A civil law system tends to be less adversarial than a common law system, since the judges rely upon detailed legal codes rather than interpreting tradition, precedent, and custom.

A common feature of many right-wing dictatorships is that they support socialist or communist ideas.

False. A common feature of many right-wing dictatorships is an overt hostility to socialist or communist ideas.

The naive immoralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

False. A 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.

An import quota is a specific tax levied on imports.

False. An import quota is a direct restriction on the quantity of some good that may be imported into a country.

By limiting imports through quotas, governments decrease the attractiveness of FDI and licensing.

False. By limiting imports through quotas, governments increase the attractiveness of FDI and licensing.

Governments always act in the national interest of their countries when they intervene in the economy.

False. Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.

Entrepreneurs and business-owners of high uncertainty avoidance cultures will be more willing to take risks and make changes.

False. Hofstede's uncertainty avoidance dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.

Since the demise of communism in the late 1980s, the number of command economies has risen dramatically.

False. In a command economy, the government plans the goods and services that a country produces and all businesses are state owned, the rationale being that the government can direct the businesses to make investments that are in the best interests of the nation as a whole. Since the demise of communism in the late 1980s, the number of command economies has fallen dramatically.

In a command economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning.

False. In a mixed economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning.

In calculating GNI data in some countries, the official figures take into account the barter agreements that take place as part of daily business transactions.

False. In some countries, the "official" figures do not tell the entire store about gross national income. Large amounts of economic activity may be in the form of unrecorded cash transactions, or barter agreements. People engage in such transactions to avoid paying taxes.

It can be more costly to do business in a country where there are no laws and regulations with regard to product safety.

False. It can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (since adhering to such regulations is costly).

Kantian ethics hold that the moral worth of actions or practices is determined by their consequences.

False. Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others. People have dignity and need to be respected as such.

The fast-food industry is a good example of a business sector where licensing is a poor option for FDI.

False. Licensing tends to be more common, and more profitable, in fragmented, low-technology industries in which globally dispersed manufacturing is not an option. A good example is the fast-food industry. McDonald's has expanded globally by using a franchising strategy, which is essentially the service-industry version of licensing. With franchising, the firm licenses its brand name to a foreign firm in return for a percentage of the franchisee's profits.

People who violate folkways are considered to be evil or bad.

False. People who violate folkways may be thought of as eccentric or ill-mannered, but they are not usually considered to be evil or bad. In many countries, foreigners may initially be excused for violating folkways.

Economic arguments for intervention are concerned with protecting the interests of certain groups within a nation, often at the expense of other groups, or with achieving some objective that lies outside the sphere protecting the environment or human rights.

False. Political arguments for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers), or with achieving some political objective that lies outside the sphere of economic relationships, such as protecting the environment or human rights. Economic arguments for intervention are typically concerned with boosting the overall wealth of a nation (to the benefit of all, both producers and consumers).

"Not free" countries are characterized by some restrictions on political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife, or civil war.

False. Political freedom of countries basically falls into three broad groupings: free, partly free, and not free. In "free" countries, citizens enjoy a high degree of political and civil freedoms. "Partly free" countries are characterized by some restrictions on political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife, or civil war. In "not free" countries, the political process is tightly controlled and basic freedoms are denied.

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states to make facilitating payments made to expedite routine government action a criminal offense.

False. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states and other signatories to make the bribery of foreign public officials a criminal offense. The convention excludes facilitating payments made to expedite routine government action from the convention.

The infant industry argument relies on an assumption that firms can make efficient long-term investments by borrowing money from the domestic or international capital market.

False. 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 location-specific advantages argument associated with John Dunning explains why firms prefer FDI to licensing or to exporting.

False. The location-specific advantages argument associated with John Dunning does help explain the direction of FDI. However, the location-specific advantages argument does not explain why firms prefer FDI to licensing or to exporting.

The value systems and norms of a country have little influence on the costs of doing business in that country.

False. The value systems and norms of a country influence the costs of doing business in that country. The costs of doing business in a country influence the ability of firms to establish a competitive advantage in the global marketplace.

Using Hofstede's dimensions of social culture, research has shown that companies headquartered in cultures where masculinity and power distance are important attributes were more likely to emphasize the importance of behaving ethically.

False. Using Hofstede's dimensions of social culture, the study found that enterprises headquartered in cultures where individualism and uncertainty avoidance are strong were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures where masculinity and power distance are important culture attributes. Such analysis suggests that enterprises headquartered in a country such as Russia, which scores high on masculinity and power distance measures, and where corruption is endemic, are more likely to engage in unethical behavior than enterprises headquartered in Scandinavia.

The WTO argues that by removing all tariff barriers and subsidies to agriculture, which of the following would occur?

Global economic growth would rise. The net effect of high tariff barriers and significant subsidies is to raise prices to consumers, reduce the volume of agricultural trade, and encourage the overproduction of products that are heavily subsidized. The WTO argues that removing tariff barriers and subsidies could significantly boost the overall level of trade, lower prices to consumers, and raise global economic growth by freeing consumption and investment resources for more productive uses.

Which of the following is a risk associated with globalization?

Global financial contagion

Which of the following is a home-country policy aimed at limiting outward FDI flow?

Limiting capital outflows. Virtually all investor countries, including the United States, have exercised some control over outward FDI from time to time. One policy has been to limit capital outflows out of concern for the country's balance of payments.

Which of the following is included in world merchandise trade?

Mining products

Which of the following is true of HIPCs?

Servicing heavy debt leaves HIPCs with little left to invest in public infrastructure.

Which of the following is an example of an advanced factor that a nation will possess as proposed by Porter

Skilled labor

Which of the following aspects of Protestantism paved the way for the subsequent emphasis on individual economic and political freedoms?

The emphasis on individual religious freedom. Protestantism gave individuals significantly more freedom to develop their own relationship with God. This emphasis on individual religious freedom may have paved the way for the subsequent emphasis on individual economic and political freedoms and the development of individualism as an economic and political philosophy.

Which of the following statements is true about the righteous moralist approach to ethics?

The righteous moralist approach is typically associated with managers from developed nations. A righteous moralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.

_____ have/has the most to gain from reductions in agricultural tariffs and subsidies that are a part of the Doha agenda.

The world's poorer nations

Which of the following is a reason that little progress has been made toward the ambitious goals set at the 1992 Earth Summit in Rio de Janeiro?

There is a culture of denial in the United States.

Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be underdeveloped, but they are potentially enormous. Which of the following is a risk to businesses moving into these regions?

There is no guarantee that democracy will thrive in many of the world's newer democratic states. Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be underdeveloped, but they are potentially enormous. Just as the potential gains are large, so are the risks. There is no guarantee that democracy will thrive in many of the world's newer democratic states, particularly if these states have to grapple with severe economic setbacks. Totalitarian dictatorships could return, although they are unlikely to be of the communist variety.

Which of the following is true of the supporters of debt relief for HIPCs?

They include Bono, the Dalai Lama, and Jeffrey Sachs among their ranks.

What is the purpose of a greenfield investment?

To establish a new operation in a foreign country. Foreign direct investment takes on two main forms. The first is a greenfield investment, which involves the establishment of a new operation in a foreign country. The second involves acquiring or merging with an existing firm in the foreign country.

Which of the following is a reason for the spread of democracy?

Totalitarian regimes failing to deliver economic progress to the vast bulk of their populations. In many countries the economic advances of the past quarter century have led to the emergence of increasingly prosperous middle and working classes who have pushed for democratic reforms. Entrepreneurs and other business leaders, eager to protect their property rights and ensure the dispassionate enforcement of contracts, are another force pressing for more accountable and open government.

Which of the following statements is true about trademarks?

Trademarks are designs and names by which businesses differentiate their products. Trademarks are designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes).

GNI per person figures can be misleading because they don't consider differences in the cost of living.

True. GNI measures the total annual income received by residents of a nation. GNI per person figures can be misleading because they don't consider differences in the cost of living.

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics.

True. Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics.

In a market economy, a supply restriction occurs when a single firm monopolizes a market.

True. In a market economy, production is determined by the interaction of supply and demand and signaled to producers through the price system. For a market to work in this manner, supply must not be restricted. A supply restriction occurs when a single firm monopolizes a market.

Dumping is viewed as a method by which firms unload excess production in foreign markets.

True. In the context of international trade, dumping is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. Dumping is viewed as a method by which firms unload excess production in foreign markets.

In the early twentieth century, the socialist ideology split into two broad camps: communists and social democrats.

True. In the early twentieth century, the socialist ideology split into two broad camps, the communists and the social democrats.

One of the biggest dangers confronting a company that goes abroad for the first time is the danger of being ill-informed.

True. International businesses that are ill-informed about the practices of another culture are likely to fail. Doing business in different cultures requires adaptation to conform to the value systems and norms of that culture. Adaptation can embrace all aspects of an international firm's operations in a foreign country.

A code of ethics is a formal statement of the ethical priorities that a business follows.

True. Many companies now draft a code of ethics, which is a formal statement of the ethical priorities a business adheres to. Often, the code of ethics draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy.

The GATT was a multilateral agreement whose objective was to liberalize trade.

True. The GATT was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

During the late 1980s and early 1990s, a wave of democratic revolutions swept the world.

True. The political economy of many of the world's nation-states has changed radically since the late 1980s. First, during the late 1980s and early 1990s, a wave of democratic revolutions swept the world.

The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade.

True. The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade. This justification challenges the rationale for unrestricted free trade found in the work of classic trade theorists such as Adam Smith and David Ricardo.

Offshore production refers to FDI undertaken to serve the home market.

True. The term offshore production refers to DFI undertaken to serve the home market. Far from reducing home-country employment, such FDI may actually stimulate economic growth (and hence employment) in the home country by freeing home-country resources to concentrate on activities where the home country has a comparative advantage.

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

True. With regard to economic factors, one of the most important variables is the sophistication of a country's economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

The Foreign Corrupt Practices Act was amended to

allow for "facilitating payments." The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business. Some U.S. businesses immediately objected that the act would put U.S. firms at a competitive disadvantage (there is no evidence that has occurred). The act was subsequently amended to allow for "facilitating payments."

Theories of international trade claim that promoting free trade is generally in the best interests of a country

although it may not always be in the best interest of an individual firm, True

An American executive of a multinational home-furnishings chain finds that one of the company's production units in Philippines employs children to work in its factories. However, most of the children employed at the factory are orphans who will be sold as forced labor or pushed into prostitution, if they lose their jobs. The executive finds that all the available alternatives seem ethically unacceptable. In this example, the American executive faces

an ethical dilemma. Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are

not always clear-cut. The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are not always clear-cut.

As a philosophy for business ethics, utilitarianism focuses attention on the need to

weigh carefully all of the social benefits and costs of a business action. Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. As a philosophy for business ethics, it focuses attention on the need to weigh carefully all of the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs.