WGU C211 - All chapter questions
"People of the same trade seldom meet together, even for merriment and diversion, but their conversation often ends in a conspiracy against the public." This quote from Adam Smith is referring to which of the following business relationship terms? a. Collusion b. Combination c. Collaboration d. Cooperation
A
A demand curve reflects each of the following except the a. quantity that each buyer will ultimately purchase . b. value each buyer in the market places on the good. c. highest price buyers are willing to pay for each quantity. d. willingness to pay of all buyers in the market.
A
According to the theory of absolute advantage, under free trade, a. each nation gains by specializing in economic activities in which a nation has absolute advantage. b. no country has an absolute advantage in economic activities. c. each nation loses by specializing in economic activities in which a nation has absolute advantage. d. every country has an absolute advantage in a certain economic activity.
A
An example of positive analysis is studying a. how market forces produce equilibrium. b. if income distributions are fair. c. whether equilibrium outcomes are fair. d. whether equilibrium outcomes are socially desirable.
A
An import quota is: a. Restriction on the quantity of imports that can be brought into a country. b. Requirements that a certain proportion of the value of the goods must be made in one country. c. Restriction on selling below costs. d. Government payments to domestic firms to produce a competitive advantage.
A
Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be: a. a contractual agreement. b. exporting. c. a wholly owned subsidiary. d. a partially owned subsidiary.
A
Cross-price elasticity of demand measures how a. the quantity demanded of one good changes in response to a change in the price of another good. b. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. c. strongly normal or inferior a good is. d. the price of one good changes in response to a change in the price of another good.
A
Foreign exchange rates are influenced by: a. all of these b. interest rates and money supply. c. relative price differences and purchasing power parity. d. supply and demand of the currencies.
A
Free trade is defined as: a. The idea that market forces should determine how much to trade with little or no government intervention. b. The exchange of goods and services for similar goods or services rather than currency. c. The absence of laws, tariffs, or any other types of barriers to trade. d. The economic advantage one nation enjoys by trading with other nations.
A
How do firms create value when engaging rivals? a. All of these b. Launch products in multiple markets. c. Hold a dominant position in key markets. d. Secure patents on key products.
A
If the supply of a product increases, then we would expect equilibrium price a. to decrease and equilibrium quantity to increase. b. and equilibrium quantity to both increase. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity to both decrease.
A
MNEs' possession and leveraging of certain valuable, rare, hard-to-imitate, and organizationally embedded (VRIO) assets overseas in the context of FDI refer to _____. a. ownership b. internalization c. location d. market imperfections
A
Miami is an ideal city for both North American firms looking to expand their business to Central and South America and for Latin American companies to expand their business to North America. This is an example of a(n): a. location-specific advantage. b. timing advantage. c. efficiency advantage. d. regulation advantage.
A
Name the three views of globalization. a. A recent force, a long-running evolution, and a pendulum b. Economic, political, and geographic c. Profits, losses, and total sales d. Past, present, and future
A
The _____ of globalization suggests that globalization is neither recent nor one-directional. a. pendulum view b. long-run historical view c. colonial view d. new-force view
A
The following are examples of location-specific advantages: a. All of these b. Industry demand that creates a skilled labor force. c. Industry demand that facilitates a pool of specialized suppliers and buyers. d. Knowledge spillovers among closely located firms.
A
The main supportive pillars of the informal institutions are _____. a. normative and cognitive b. cognitive and regulatory c. regulatory, normative, and cognitive d. regulatory and normative
A
The percentage of total industry sales accounted for by the top firms is called _____. a. concentration ratio b. barriers to entry c. commonality ratio d. collusion index
A
The price leader's _____ is defined as sufficient resources possessed to deter and combat defection. a. capacity to punish b. capacity to imitate c. capacity to compete d. capacity to collude
A
The strategy of treating each country as a unique market and in total isolation is referred to as _____. a. localization b. semiglobalization c. standardization d. total globalization
A
When firms indirectly coordinate actions by signaling their intentions, often in an attempt to reduce output and maintain pricing above competitive levels, they are engaging in: a. tacit collusion. b. none of these answers c. competitor analysis. d. explicit collusion.
A
Which of the following foreign exchange transactions provide protection to traders and investors from being exposed to fluctuations of the spot rate? a. Forward transactions b. Spot transactions c. Currency swaps d. Direct transactions
A
Which of the following is NOT a motivation for trading internationally? a. Institutions can either limit or facilitate trade. b. The people of a country have the opportunity to purchase valuable, rare, and inimitable goods from other countries that would be difficult or impossible to produce in their own countries at a reasonable price. c. Countries can earn revenue by collecting taxes on imports and exports. d. Firms that are producing valuable, rare, and inimitable goods can earn more revenue by selling their goods to a broader audience.
A
Which of the following is a first-mover advantage? a. Avoid clashing with dominant firms in their home market. b. Resolve technological and market uncertainty. c. Difficulty adapting to market changes. d. Provide an opportunity for a free ride.
A
Which of the following is a first-mover advantage? a. Avoidance of clash with a dominant firm at home b. Resolution of technological and market uncertainty c. No difficulty in adapting to market changes d. Opportunity to free ride on second mover investments
A
Which of the following is true of a pure market economy? a. All factors of production are privately owned. b. Its policies are based on religious decree. c. All factors of production are owned by the government. d. It has elements of both a market economy and a command economy.
A
Which of the following is true of semiglobalization? a. It is a type of globalization that lies between total isolation and total globalization. b. It is a form of globalization that considers each nation in isolation when conducting business. c. It is a type of globalization that adopts a strategy of treating the entire world as one market. d. It is a form of globalization that treats each country as a unique market.
A
Which of the following is true of the common law system? a. It has spread to all English-speaking countries and their (former) colonies. b. It does not allow interpretations of the law by judges. c. It is the oldest legal system in the world. d. It bases its legal judgment primarily on the dominant religion of the country.
A
Which of the following political perspectives maintains the view that FDI has both pros and cons and can only be approved when its benefits outweigh costs? a. Pragmatic nationalism b. Protectionism c. The radical view of FDI d. The free market view of FDI
A
Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it? a. Attack, counterattack b. Competition, cooperation c. Cooperation, signaling d. Tacit collusion, explicit collusion
A
Which of the following would be considered an example of formal institutions? a. Laws b. Ethics c. Norms d. Cultures
A
Why do managers, at some of the largest global corporations, fail to engage in currency hedging? a. They believe that the protection against fluctuations in exchange rates is not worth the potentially high cost of currency hedging. b. Since strategic hedging is the same as currency hedging, only with more protection, they believe that strategic hedging is the better choice. c. They believe that fluctuations in exchange rates are so minimal that currency hedging is not necessary. d. All of these reasons
A
_____ is defined as the conversion of one currency into another at Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future. a. Currency swap b. Spot transaction c. Forward transaction d. Currency hedging
A
A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise . As a result, the consumer surplus in the market for red grapes a. decreases, and the consumer surplus in the market for red wine increases. b. decreases, and the consumer surplus in the market for red wine decreases. c. increases, and the consumer surplus in the market for red wine decreases. d. increases, and the consumer surplus in the market for red wine increases.
B
A firm establishing a manufacturing plant in a foreign country due to the cheap labor costs in that country is an example of the _____ advantage that the firm enjoys. a. internalization b. location c. ownership d. externalization
B
A fundamental aspect of _____ is that it effectively conducts global business by providing an individual the right to freedom of expression and organization. a. communist totalitarianism b. democracy c. right-wing totalitarianism d. theocracy
B
A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through: a. forward transactions. b. strategic hedging. c. dissemination risk. d. currency swaps.
B
A savvy global business manger must understand the following concepts to be considered literate about foreign exchange: a. Understand the factors that influence exchange rates b. All of these c. Understand the ways to hedge currency risks d. Understand the foreign exchange market
B
Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to a. only new customers who enter the market because of the lower prices. b. both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. c. only existing customers who now get lower prices on the gowns they were already planning to purchase. d. Consumer surplus does not increase; it decreases.
B
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. closer to the vertical axis the demand curve will sit b. flatter the demand curve will be. c. steeper the demand curve will be. d. further to the right the demand curve will sit.
B
Foreign portfolio investment (FPI) is: a. investment in activities that manage foreign subsidiaries. b. investment in foreign stocks and bonds that do not involve the active management of foreign assets. c. investment in activities that manage foreign acquisitions. d. investment in foreign research and development.
B
Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound, a. Janine experiences an increase in consumer surplus, but Henry does not. b. both Janine and Henry experience an increase in consumer surplus. c. Henry experiences an increase in consumer surplus, but Janine does not. d. neither Janine nor Henry experiences an increase in consumer surplus.
B
If an IMF member country were to find itself in a severe balance of payments crisis that threatened its financial stability, the IMF would most likely: a. all of these answers b. give the country a loan but require the country to make long-term policy reforms. c. reduce the country's quota. d. give the country an emergency grant.
B
Import quotas are a type of _____. a. tariff barrier b. nontariff barrier c. antidumping duty d. voluntary export restraint
B
Protectionism is similar to mercantilism as they both advocated _____. a. dividing the nations of the world into three categories based on its innovation capabilities b. government involvement in international trade c. developing comparative advantages based on a nation's locally abundant factors d. specializing in economic activities in which a nation can have an absolute advantage
B
Risk analysis of any country must include an analysis of the country's: a. foreign exchange rate policies. b. currency risks. c. IMF status. d. history of economic recessions.
B
Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus is not affected by this change in market forces. d. We would have to know whether the demand for lemons is relatively elastic or inelastic to make this determination.
B
The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. minimizes the expenditure of buyers. b. maximizes the combined welfare of buyers and sellers. c. maximizes costs of the seller. d. maximizes tax revenue for the government.
B
Which of the following economies would be characterized as having a laissez faire policy? a. Command economy b. Pure market economy c. Socialist economy d. Mixed economy
B
Which of the following entry modes is a type of strategic alliance? a. Wholly owned subsidiary b. Licensing c. Acquisition d. Export
B
Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors? a. Organizing strategic alliances with rivals for cost reduction b. Developing new markets where there is less competition c. Sending an open signal for a truce through the media d. Seeking mutual forbearance by entering new markets
B
Which of the following is a benefit of FDI to home countries? a. Decrease in competition between local firms b. Learning from operations c. Capital outflow d. Creation of new jobs
B
____ is defined as the extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm. a. Mutual forbearance b. Resource similarity c. Collusion d. Game theory
B
A key determinant of the price elasticity of supply is the a. price elasticity of demand. b. income of consumers. c. time horizon. d. importance of the good in a consumer's budget.
C
Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be: a. a partially owned subsidiary. b. exporting. c. a wholly owned subsidiary. d. a contractual agreement.
C
Demand is said to be inelastic if a. buyers respond substantially to changes in the price of the good. b. the price of the good responds only slightly to changes in demand. c. the quantity demanded changes only slightly when the price of the good changes. d. demand shifts only slightly when the price of the good changes.
C
Demand is said to be price elastic if a. demand shifts substantially when income or the expected future price of the good changes. b. the price of the good responds substantially to changes in demand. c. buyers respond substantially to changes in the price of the good. d. buyers do not respond much to changes in the price of the good.
C
Equilibrium price must decrease when demand a. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. b. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. d. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously.
C
Equilibrium quantity must decrease when demand a. increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. b. decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease. d. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease.
C
Firms prefer FDI to licensing because FDI_____. a. increases the chances of opportunism when dealing with a host nation entity b. protects the firm from economic agglomeration c. provides the firm with direct ownership to its foreign assets d. requires complete dissemination of technological know-how to host nation entity
C
Goods with many close substitutes tend to have a. price elasticities of demand that are unit elastic. b. income elasticities of demand that are negative. c. more elastic demands. d. less elastic demands.
C
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the a. consumer has consumer surplus of $2 if he or she buys the good. b. market is not a competitive market. c. consumer does not purchase the good. d. price of the good will fall due to market forces.
C
If a firm engages in final assembly in its home operations, then which of the following operations of the firm in a foreign country would be considered a downstream vertical FDI? a. Final assembly b. Components procurement c. Marketing d. Research and development
C
If a seller in a competitive market chooses to charge more than the going price, then a. the owners of the raw materials used in production would raise the prices for the raw materials. b. the sellers' profits must increase. c. buyers will make purchases from other sellers. d. other sellers would also raise their prices.
C
If the cross-price elasticity of two goods is negative, then the two goods are a. inferior goods. b. normal goods. c. complements. d. necessities.
C
OLI advantages refer to a firm's quest for _____via FDI. a. organization advantages, leadership advantages, and innovation advantages b. oligopolistic advantages, laissez-faire advantages, and intrafirm trade advantages c. ownership advantages, location advantages, and internalization advantages d. outsourcing advantages, licensing advantages, and importing advantages
C
The _____ view of global business focuses on internal factors that can help a firm overcome its external environment. a. socio-cultural b. institution-based c. resource-based d. industry-based
C
The fundamental question in global business is: a. What determines the success and failure of firms' new product globalization? b. What determines the success and failure of firms' foreign entry? c. What determines the success and failure of firms around the globe? d. What determines the success and failure of firms based in the US?
C
The price elasticity of demand measures a. the movement along a supply curve when there is a change in demand. b. how much more of a good consumers will demand when incomes rise. c. buyers' responsiveness to a change in the price of a good. d. the extent to which demand increases as additional buyers enter the market.
C
The price elasticity of supply measures how much a. the price of the good responds to changes in supply. b. sellers respond to changes in technology. c. the quantity supplied responds to changes in the price of the good. d. the quantity supplied responds to changes in input prices.
C
The process of anticipating rivals' actions in order to both revise a firm's plan and prepare to deal with rivals' response is called _____. a. multimarket competition b. prisoners' dilemma c. competitor analysis d. mutual forbearance
C
Which of the following are examples of ownership, location, and internalization (OLI) advantages? a. Possession of valuable foreign assets b. Replacement of cross-border markets with one firm operating in two markets c. All of these d. Unique natural resources that provide advantages to the firm
C
Which of the following are the primary types of foreign exchange transactions made by financial companies? a. Forward transactions, swaps, exchange rate adjustments b. Swaps and spot transactions c. Swaps, spot transactions, forward transactions d. Spot transactions, forward transactions, vertical transactions
C
Which of the following is NOT a proposition of the institution-based view of global business? a. In situations where formal constraints are unclear, informal constraints will play a larger role in reducing uncertainty. b. Managers and firms rationally pursue their interests and make choices within the formal and informal constraints. c. Informal institutions do not govern firm behavior. d. Formal and informal institutions combine to govern firm behavior.
C
Which of the following is a disadvantage of licensing and franchising? a. High development costs b. High risk in overseas expansion c. Little control over marketing d. Creation of a monopoly
C
Which of the following is not a determinant of the price elasticity of demand for a good? a. The time horizon b. The definition of the market for the good c. The steepness or flatness of the supply curve for the good d. The availability of substitutes for the good
C
Which of the following is not an example of a market? a. In Florida, there are many buyers and sellers of key lime pie. b. A small town has only one seller of electricity. c. In the United States, a sick person cannot legally purchase a kidney. d. The availability of Internet shopping has expanded the clothing choices for buyers who do not live near large cities.
C
Which of the following statement is NOT true about market economy? a. The government only performs functions the private sector cannot perform b. Market economy is characterized by the "invisible hand" of market forces. c. All factors of production should be government owned and controlled. d. The government takes a hands-off approach in market economy.
C
A competitive market is a market in which a. an auctioneer helps set prices and arrange sales. b. the forces of supply and demand do not apply. c. there are only a few sellers. d. no individual buyer or seller has any significant impact on the market price.
D
A group of buyers and sellers of a particular good or service is called a. a competition. b. a coalition. c. an economy. d. a market.
D
Assume Lianna buys coffee beans in a competitive market. It follows that a. Lianna has a limited number of sellers from which to buy coffee beans. b. Lianna might have trouble finding coffee beans at his local store. c. Lianna will negotiate with sellers whenever he buys coffee beans. d. Lianna cannot influence the price of coffee beans even if he buys a large quantity of them.
D
Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? a. $4 b. $6 c. $2 d. $8
D
Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the following is true? a. Chile has a comparative advantage in wine. b. France has a comparative advantage in blueberries. c. There is no reason for Chile and France to trade. d. France has a comparative advantage in wine.
D
Globalization can be viewed as: a. A new force sweeping through the world in recent times. b. A long-run historical evolution since the dawn of human history. c. A pendulum that swings from one extreme to another from time to time. d. All of these answers.
D
If Google and Microsoft were to propose a joint venture to develop a new internet search engine, the US government would block them based on: a. Unfair trade law. b. Antidumping law. c. Bankruptcy law. d. Antitrust law.
D
If the demand for a product increases, then we would expect equilibrium price a. to decrease and equilibrium quantity to increase. b. and equilibrium quantity both to decrease. c. to increase and equilibrium quantity to decrease. d. and equilibrium quantity both to increase.
D
Imagine your manufacturing plant gets most of its raw materials from suppliers along the Gulf Coast of the United States. However, you have alternate suppliers from other parts of the country lined up, just in case the Gulf Coast is hit with a devastating hurricane or other debilitating disaster and your suppliers there can't deliver the raw goods. You have engaged in: a. A formal institution b. Resource planning c. Semiglobalization d. Scenario planning
D
On a graph, consumer surplus is represented by the area a. below the price and above the supply curve. b. below the demand curve and to the right of equilibrium price. c. between the demand and supply curves. d. below the demand curve and above price.
D
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
D
The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports. a. comparative advantage b. absolute advantage c. factor endowment d. protectionism
D
The _____ theory viewed international trade as a zero-sum game. a. comparative advantage b. strategic trade c. national competitive advantage of industries d. mercantilism
D
The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____. a. advocates adopting a single method for achieving globalization b. supports the ideology of total globalization c. postulates the ideology of localization d. focuses on the internal strengths on the firm
D
What are the possible benefits of being a late mover? a. Opportunity to free ride on first-mover investments b. First mover's difficulty to adapt to market changes c. Resolution of technological and market uncertainty d. All of these answers
D
Which economic system is the most common? a. A global economy b. A pure market economy c. A pure command economy d. A mixed economy
D
Which of the following is NOT a nontariff trade barrier (NTB)? a. Subsidies b. Local content requirements c. Import quotas d. Cultural distance
D
Which of the following is an equity mode of entry? a. Indirect exports b. R&D contracts c. Licensing/franchising d. Wholly owned subsidiaries
D
Which of the following is true of globalization according to the "pendulum view" perspective? a. Globalization is a recent phenomenon of human trade. b. Globalization is being interrupted by artificial barriers to the flows of goods, services, capital, and knowledge. c. Globalization is a Western ideology focused on exploiting and dominating the world through MNEs. d. Globalization is a not a one-directional phenomenon.
D
Which of the following statements best describes an FDI? a. Turning over an organizational activity to an outside supplier to perform on behalf of the firm b. Outsourcing an in-house activity to another domestic firm c. Assigning firm activities to foreign firms in neighboring countries d. Setting up subsidiaries in foreign locations to do in-house work
D
_____ refers to a legal system based on religious teachings. a. Common law b. Civil law c. Right-wing totalitarian law d. Theocratic law
D
_____ refers to non-financial companies spreading out its activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions. a. Currency swapping b. Currency hedging c. Currency pegging d. Strategic hedging
D