Ch 2: National Differences in Political, Economical, and Legal System

political economy

The political, economic, and legal systems of a country.

private action

Violation of property rights through theft, piracy, blackmail, and the like by private individuals or groups.

In 1987, the Republic of Ireland moved to deregulate business and actively encourage private enterprise. These actions are hallmarks of ________ economies. command communist totalitarianism mixed tribal totalitarianism market

market The actions by the government of the Republic of Ireland to deregulate business and encourage private enterprise are typical of market economies.

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

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.

Since moving toward a market-based economy, foreign investment into the Republic of Ireland has decreased. high corporate tax rates relative to neighboring countries have encouraged foreign investment into Ireland. the Republic of Ireland has experienced strong economic growth. membership in the European Union has forced Ireland to adopt nationalistic policies. unemployment rates in Ireland have been rapidly rising.

the Republic of Ireland has experienced strong economic growth Since moving to a market-based economy, the Republic of Ireland has experienced strong economic growth.

contract

A document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.

market economy

An economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced.

individualism

An emphasis on the importance of guaranteeing individual freedom and self-expression

product safety laws

Set certain safety standards to which a product must adhere.

collectivism

A political system that emphasizes collective goals as opposed to individual goals

United Nations Convention on Contracts for the International Sale of Goods (CISG)

A set of rules governing certain aspects of the making and performance of commercial contracts between sellers and buyers who have their places of businesses in different nations.

civil law system

A system of law based on a very detailed set of written laws and codes

theocratic law system

A system of law based on religious teachings.

common law

A system of law based on tradition, precedent, and custom; when law courts interpret common law, they do so with regard to these characteristics.

communist totalitarianism

A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.

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

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 their support for socialist or communist ideas. True False

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

The common law system is a relatively new form of law that emerged in the United States and is based on codes written within the last 80 years or so. True False

False The common law system evolved in England over hundreds of years. It is now found in most of Great Britain's former colonies, including the United States.

totalitarianism

Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited

patent

Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention.

public action

The extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats.

social democrats

Those committed to achieving socialism by democratic means

socialists

Those who believe in public ownership of the means of production for the common good of society

communists

Those who believe socialism can be achieved only through revolution and totalitarian dictatorship

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

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

In mixed economies, governments tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests. True False

True 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 mixed economies, governments also tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests.

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

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

Foreign Corrupt Practices Act (FCPA)

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.

Which is the best description of the economic system in the Republic of Ireland? a command economy a mixed economyIncorrect theocratic totalitarianism a market economy right-wing totalitarianism

a market economy The Republic of Ireland can best be described as a market economy. In a pure market economy, all productive activities are privately owned. Since 1987, the Republic of Ireland has actively encouraged private enterprise.

Historically, command economies were found in ________ countries, where collectivist goals were given priority over individual goals. democratic communist libertarian free-market

communist 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.

You face demands from government officials that will be required before you are allowed to do business. Payments are to be made to individuals, not the government.

Public action

A group of hackers based in the country where your firm wishes to conduct business has broken into your database and is demanding payment or they will destroy your firm's records.

Private Action

Paris Convention for the Protection of Industrial Property

International agreement to protect intellectual property.

World Intellectual Property Organization

International organization whose members sign treaties to agree to protect intellectual property.

product liability

Involves holding a firm and its officers responsible when a product causes injury, death, or damage.

The government of Iran is ruled by religious figures and they ensure that citizens adhere to Islamic teachings. Iran is a ________ law system. civil traditional theocratic common

theocratic 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.

Contracts drafted under a common law framework tend to be very detailed with contingencies spelled out. very short and general in scope. inexpensive to draw up between two parties. inflexible and difficult to adjudicate.

very detailed with contingencies spelled out. 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.

Which of these is a characteristic of a pure command economy? All businesses are owned by the state. There is free and fair competition between private producers. The goods and services that a country produces are planned by consumers. Prices are determined by market forces.

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.

command economy

An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.

property rights

Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.

Which is true of the Republic of Ireland? Ireland's economy grew more quickly than its European counterparts following the country's independence from the United Kingdom. Shifting to a more nationalistic policy has proved to stimulate economic growth. High tariff barriers limited economic growth following its independence from the United Kingdom. The country's young workforce and membership in the European Union have been deterrents to foreign investment. Falling wage rates continue to attract foreign manufacturing jobs

High tariff barriers limited economic growth following its independence from the United Kingdom High tariff barriers limited economic growth following its independence from the United Kingdom.

tribal totalitarianism

Political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.

representative democracy

Political system in which citizens periodically elect individuals to represent them in government

democracy

Political system in which government is by the people, exercised either directly or through elected representatives

right-wing totalitarianism

Political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.

theocratic totalitarianism

Political system in which political power is monopolized by a party, group, or individual that governs according to religious principles.

You thought your contract would protect your rights, but your customer is now refusing to pay for merchandise already received, and the courts don't seem willing to help you.

Private action

Your business is told to pay a group of individuals or face violent retribution. You have learned other similar businesses have faced similar demands.

Private action

intellectual property

Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how); intellectual property can be protected by patents, copyrights, and trademarks.

A government official is demanding trips, education payments for his children, and a new car before he will allow your firm to be considered for a procurement bid.

Public action

You've learned your firm will face very expensive new licensing fees in addition to a new tax regulation that targets foreign firms (you) in a specific industry.

Public action

political system

System of government in a nation.

legal system

System of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained

contract law

The body of law that governs contract enforcement.

trademarks

The designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.

copyrights

The exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit.

All things being equal, which nation offers a more attractive place to do business? a nation that lacks democratic institutions a nation where economic activity is regulated by the state a nation with a market-based economic system a nation where the rule of law does not take precedence over 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.

Izzy was found guilty of a crime which demanded a prison sentence. The length of her sentence was based on previous cases similar to hers and what is traditionally prescribed for the type of crime she committed. Izzy was tried and convicted under a ________ law system. civil common theocratic codified

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

The role of the government in a market economy involves encouraging vigorous free and fair competition among private producers. mobilizing economic resources of the country for public good. determining the prices at which goods and services will be sold. planning the types and quantities of goods and services to be produced.

encouraging vigorous free and fair competition among private producer 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).