Exam 1
Globalization critics argue that the decline in unskilled wage rates in advanced economies is due to the:
*migration of low-wage manufacturing jobs offshore.
China is a large and growing economy and receives a lot of foreign direct investment. Despite that, it's risky to invest there. All of the following EXCEPT___ are disadvantages of investing in China
Falling labor costs
A key advantage of M&A (mergers and acquisitions) versus a greenfield investment as a form of FDI is that M&A gives firms greater control over their operations.
False
According to Freedom House, all democracies are free countries in terms of political and civil liberties.
False
American steel manufacturers would have the most to lose if the US imposed tariffs on imported steel.
False
As a result of globalization, international businesses can avoid the haggle of currency exchanges during cross-border transactions.
False
As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities.
False
Authoritarian countries are more likely to have capitalistic economic systems based on free markets
False
China is a better place than India to locate FDI because of its democratic government and capitalist economy.
False
Command economies provide a more favorable environment for innovation and entrepreneurs than market economies.
False
Corruption is a problem US firms would encounter choosing either China or India as FDI locations
False
Entrepreneurial individuals have fewer economic incentives to develop valuable new innovations in market economies than in planned economies.
False
FDI in the form of mergers and acquisitions is likely to have a larger positive employment effect on the host country than other forms of FDI.
False
In the video we watched, Tasmania was "tragic" because increased global integration caused severe job losses.
False
Limits on imports are often in the interests of domestic consumers, but not domestic producers.
False
NAFTA is the main reason why the US has lost so many manufacturing jobs
False
Political systems that emphasize collectivism tend to be democratic, while political systems that place a high value on individualism tend to be totalitarian.
False
The United States accounted for a significantly larger share of the world economy in 2012 than it did in the 1960s.
False
The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country.
False
Which of the following is an important benefit countries derive from trade?
Gains from Specialization
Which of the following statements is true about import quotas?
Import quotas benefit domestic producers by limiting import competition.
In countries with HIGHER power distance scores, which of the following would you expect to see in the workplace?
Importance of titles, credentials and formal roles in shaping relationships between colleagues at different levels in the hierarchy
After ten years of working in Japan, Catie returned to the U.S. "I couldn't take it anymore. I just wanted to be rewarded for **my own effort**, not the effort of my group or how senior I was in the company." Catie is expressing a view consistent with which dimension of culture?
Individualism/Collectivism
In the context of "knowledge" economy of the twenty-first century, which of the following statements is true about intellectual property?
Intellectual property has become an increasingly important source of economic value for businesses.
Which of the following factors is taken into consideration by David Ricardo's theory of comparative advantage in order to explain the pattern of international trade?
International differences in labor productivity
What type of risk can be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights?
Legal
The US-based law firm Kirkland and Ellis notes that "Approximately 81 percent of the value of all counterfeit goods seized by American customs in 2010 originated in China. While some Chinese companies did appear and defend themselves, many simply ignored these lawsuits." This is an example of what kind of risk?
Legal risk
GDP or GNI are often used to measure a country's economic development, however these measures are criticized for missing important aspects of countries' development levels. Which aspects of development that are NOT captured by GDP or GNI are incorporated in Human Development Indices?
Life expectancy
On the first day of class, we talked about Brexit and the reasons why it might have passed. Which of the following is NOT an important concern raised by critics of globalization?
Lower income inequality
For the United States, a future in which 25% over the next decade and China grows 75% is superior to a future in which the United States grows 10% over the next decade and China grows 11% for all of the following reasons EXCEPT:
Much faster Chinese economic growth will hurt the US militarily
In countries with HIGHER uncertainty avoidance scores, what kinds of benefits do you think employees would prefer?
Pay based on seniority
A recent study of companies in Malaysia showed that firms tied to one political party tend to be punished when the other party is in power. A manager of a Malaysian hotel chain complained, "What can I say? If you don't show a little love to the guys in power, you don't get anything. On the other hand, don't show too much love or the guys who take over will crush you." This is an example of what kind of risk?
Political Risk
Counterfeit copies of software and Hollywood films are most likely to be produced and sold in countries with:
Poor intellectual property protection
The most isolated countries of the world are also the_______.
Poorest
An Indonesian manager of a local subsidiary of the giant firm Procter & Gamble (P&G) expressed frustration over the layout of offices: "P&G uses completely open offices with no doors or walls; this is not how we do things locally. In Indonesia, people respect those who are more senior to them in a company and do not approach them without having made an appointment." This is an example of which cultural dimension?
Power Distance
Maria, a young advertising executive who has worked all around Europe observes that, "In France, junior people are supposed to 'know their place' by keeping quiet in meetings where more senior people are present, whereas in Denmark, young people are encouraged to voice their opinions in meetings." This is an example of differences in which cultural dimension:
Power Distance
Which type of law protects people and consumers from hazardous products made by companies?
Product liability law
Which of the following is the most common political argument for government intervention in international trade?
Protecting jobs and industries from unfair foreign competition
When a tariff is imposed on foreign imports that come into the United States, who pays for the tariff?
US Consumers
A recent labor market survey in Sweden and Spain revealed that Swedish workers value "interesting work" and "intellectual challenge" much more than they value "job security." On the other hand, Spanish workers place a very high value on job security. A researcher who conducted the survey noted that Spanish workers "would much rather have a more boring job with more stable pay than take the chance of being laid off." This is an example of which cultural dimension:
Uncertainty Avoidance
Which group of US workers might be worse off from trade liberalization?
Unskilled manufacturing workers
How do we benefit when our trade partners become better at producing the things we buy?
We benefit from lower prices and more choices in the things our trade partners make
In a social context, the term values is used to describe the:
abstract ideas about what a group believes to be good, right, and desirable.
The lowering of trade and investment barriers:
allows firms to base production at optimal locations outside their home country.
A country characterized with low uncertainty avoidance and low masculinity will:
be less resistant to change and less distinguishing between men and women in the same job.
In 2013, economists estimated that Americans spend about $32 billion more each year on purchases of goods and services than they would if there were no barriers to trade on goods entering the USA. Their figures suggest that the price of protection amounts to $170,000 a year per job saved. But workers whose jobs are "saved" receive only a fraction of that amount. Policies like costly trade protection, illustrated in the paragraph above, exist because the _________ to each individual __________ are relatively small and hard to measure, while the ________ to each _________ whose job is "saved" are very large and easy to calculate.
costs; consumer; benefits; worker
If a society emphasizes the group as the primary unit of social organization, it is most likely to:
discourage employees from moving from company to company.
FDI is risky because of the problems associated with:
doing business in a different culture where the rules of the game may be very different.
If Argonia exports vast quantities of cheap toys to Cadmia, selling them at below their costs of production, it would constitute:
dumping.
Generally, the costs and risks associated with doing business in a foreign country are typically lower in:
economically advanced countries.
Direct effects of FDI on employment in the host country arise when a foreign MNE:
employs a number of host country citizens.
The state of New Jersey is famous for producing blueberries, which are sometimes exported to the country of Miquellon. Last year, Miquellon trade authorities held the blueberries on the customs dock for a month, telling New Jersey exporters that the berries might have an insect in them that is not native to Miquellon. Before the blueberries could be inspected, they rotted on the docks at Miquellon. What kind of trade policy is illustrated in this example?
Administrative Protection
By lowering production costs, subsidies help domestic producers to:
gain export markets.
Specialization - which began to spread rapidly around the time of Adam Smith - has allowed people and societies to do all of the following EXCEPT_____________.
Benefit from consuming only things we make ourselves
Even though consumers benefit a lot from free trade, they don't lobby the government for it because:
Benefits to individual consumers are small and hard to measure
What was the tragedy of Tasmania?
Breaking away from Australia allowed people to become more specialized
A composer can protect an original musical score from being copied and sold by someone else by acquiring for the score a(n):
Copyright
According to Vernon, which of the following influences the movement of the locus of global production from advanced countries to developing countries?
Cost considerations
Which of the following is true of the relationship between trade and economic growth?
Countries open to international trade display higher growth rates than those that close their economies to trade.
Due to strong legal protection of property rights, businesses and individuals will:
invest more in innovations.
For foreign direct investment (FDI) to occur, a firm should primarily:
invest resources in business activities outside its home country.
As China's economy has grown over the years, labor has become much more expensive. For US firms, this reduces the attractiveness of China as an FDI location for firms looking to:
Exploit differences in factor prices
A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:
FDI
Although China and India are very large markets when measured by number of consumers, they are relatively small markets when measured in economic terms due to their:
limited purchasing power.
Managers at the Blue Dragon Inc., an international company with operations in China and the United States, are often heard complaining about the difficulties in achieving synergy and cooperation between the employees of both the countries. On extensive research it was concluded that the cultural differences between these countries, which resulted in different work-related values, caused the lack of cooperation. In order to effectively tackle this problem, Blue Dragon Inc. should:
vary its management processes and practices to account for these differences.
The main tenet of mercantilism was that it was in a country's best interests to maintain a trade surplus.
True
Which of the following is a feature of representative democracy?
A nonpolitical police force and armed service
In which countries are we likely to find free market economies?
Countries where individual goals are given primacy over collective goals
In some countries, it can be very difficult and expensive for companies to fire longer-term workers. This type of system would probably be most likely in:
Countries with high uncertainty avoidance
If the United States raised tariffs on auto parts coming from Mexico as an effort to bring jobs back to the US, which of the following could happen? A. It could raise costs for automakers in the US, bringing job losses to that industry B. Auto parts manufacturing could move from Mexico to another low-cost country like China, rather than moving back to the US. C. It could hurt auto supply chains throughout North America D. All of the above
D. All of the above
When one group - for example workers in a factory that would close if trade were liberalized - has potential losses from trade liberalization that are large and easy to measure: A. The group is typically smaller than the population who would gain from trade liberalization B. The group will find it relatively easy to lobby for the policies it wants C. The group's potential losses are probably smaller - in total - than the amount everyone else would gain if trade were liberalized D. The group's efforts at lobbying for trade protection will be more successful than efforts made by the wider population, to lobby for trade liberalization E. All of the above
E. All of the above
Which of the following infrastructure problems makes India a difficult place in which to do business? A. Bad roads B. Electricity shortages C. Poor sanitation D. Inadequate schooling E. All of the above
E. All of the above
Which of the following is a critical flaw in Mercantilist ideas about trade? A. Trade is a zero sum game B. Countries that amassed gold from exporting would not experience inflation C. The purpose of trade is to export D. Countries should strive to minimize imports E. All of the above
E. All of the above
Identify the INCORRECT statement about trade barriers. A. They raise the costs of exporting products to a country. B. They may put a firm at a competitive advantage relative to indigenous competitors. C. They may limit a firm's ability to serve a country from locations outside of that country. D. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise. E. All of the above statements about trade barriers are correct
E. All of the above statements about trade barriers are correct
Lamboria Republic is facing a high rate of inflation, and the government debt in the country is also high. As a result, the country's business environment is beginning to deteriorate, and the profits of the business enterprises are hurt. According to this information, Lamboria Republic is facing which of the following type of risk?
Economic
In recent earnings announcements, U.S.-based firms that export to Europe have seen large declines in both sales and profits due to the strong U.S. dollar. This is an example of which kind of risk?
Economic risk
Which of the above describes Cuba's transformation?
Socialism to mixed economy
Which of the following statements is true with regard to the loss of manufacturing jobs in the United States?
Technological change is considered to be the main reason for manufacturing job losses.
In the video "How the Division of Knowledge Saved my Son's Life," the professor indicates that it's more likely we will find a highly specialized doctor in places like New York or Los Angeles than in small towns in rural America. What is the explanation for this phenomenon?
The larger the market, the more people can specialize
The hockey stick of human prosperity shows the rise in humans' standard of living plotted over time.
True
The US is better than China at management consulting but worse than China at making high-tech chips that make supercomputers run. The US decides to specialize in management consulting and import high-tech chips from China. This example illustrates:
The theory of Comparative Advantage
By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.
True
Despite all the talk about the emerging global village, differences between countries such as cultures and political systems are very profound and enduring.
True
If the US raised tariffs on imported steel, the main effect would be harm done to US-based users of steel like automakers and ship builders.
True
Import tariffs protect domestic producers against foreign competitors.
True
In a two country, two-good model, a key difference in the predictions of Absolute (AA) and Comparative Advantage (CA) is that CA says two countries can gain from trade even if one country is better than the other at producing both goods.
True
In general, as countries get richer, they enact tougher environmental and labor regulations.
True
In general, if a labor-intensive country liberalizes trade with a capital -intensive country, wages in labor-intensive industries will fall in the capital-intensive country.
True
Trade protection is mainly ____________ in nature and often comes from the ability of ______________ to form interest groups and lobby the government.
political; losers from free trade
