Bus 70 Final Exam

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Greatest source of conflict will be
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Terms in this set (140)
A totalitarian regime can promote economic growth if itcommits to a market system and values strong protection of property rights.One common measure of economic development is a country'sgross national incomeAccording to the Human Development Index, average income adjusted for PPP should always be sufficient toprovide basic needs such as food and shelterAfter the formation of a free trade area for its member countries, the United States found that its high cost furniture producers in North Carolina were replaced by low cost producers from another country within the free trade area. This is an example oftrade creationWhich of the following is true with regard to regional economic integrationRegional economic integration is generally good for consumers because it lowers prices.The six countries on the northern side of the Pacific Rim agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to asregional economic integrationJason loves to invent new products but knows that in his country it is difficult for him to reap the rewards of innovations because they are quickly and legally copied by others after he releases them into the marketplace. As a result, Jason has decided to stop inventing. What is preventing Jason from doing what he lovesWeak property rights protectionThe European Union is considered an economic union even thoughnot all members have adopted a common currencyWhich of the following is not a threat that emerges for international businesses as a result of regional economic integrationThe costs of doing business in a single market may fallFree Trade Areagroup of countries committed to removing all barriers to the free flow of goods and services between each other but pursuing independent external trade policiesCustoms Uniongroup of countries committed to removing all barriers to the free flow of goods and services between each other and the pursuit of a common external trade policyCommon Marketgroup of countries committed to removing all barriers to the free flow of goods, services, and the factors of production between each other and the pursuit of a common external trade policyPolitical Unioncentral political apparatus coordinates economic, social, and foreign policyEconomic Uniongroup of countries committed to removing all barriers to the free flow of goods, services, and the factors of production between each other and the pursuit of a common external trade policy, the adoption of a common currency, and the harmonization of tax ratesFirms based in a free trade area realized potentially enormouscost economiesThe lowering of barriers to trade and investment among countries within a trade group will probably be followed byincreased trade competitionFactor endowmentscountry's endowment with resources such as land, labor, and capitalHeckscher Ohlin Theory argues that the pattern of international trade is determined bydifferences in factor endowmentsProduct life cycle theory suggests that trade patterns are influenced bywhere a new product is introducedNew trade theory states thattrade allows a nation to specialize in the production of certain goods, attaining scale economies and lowering the costs of producing those goods, while buying goods that it does not produce from other nations that are similarly specializedPorter's theory of national competitive advantage suggests thatthe pattern of trade is influenced by four attributes of a nation: factor endowments, domestic demand conditions, related and supporting industries, and firm strategy, structure and rivalryWhich of the following is not one of the main ways government intervene in tradecredit portfoliosTariffs do not benefitconsumersAccording to infant industry argumentgovernments should temporarily support new industries until they have grown strong enough to meet international competitionWhich of the following is not a political reason for governments to intervene in global tradestrategic trade policyTrade policies arepro-producer and anti-consumerImport tariffs reduce theoverall efficiency of the world economyTwo types of arguments for government interventionpolitical and economicCommon political argument for intervention is itsnecessary to protect jobsProblems with strategic trade policy is it mayinvite retaliation and may be captured by special-interest groupInfant industry argument for government intervention contends that to let manufacturing get a toehold, governments shouldtemporarily support new industriesStrategic trade policy suggests that with subsidies, government can helpa domestic firms gain first-mover advantages in global industries where economies of scale are importantHigh transportation costs or tariffs imposed in imports help explain whymany firms prefer FDI or licensing over exportingKnickerbocker's theory suggests that much FDI is explained byimitative behavior by rival firms in an oligopolistic industryDunning has argued that location specific advantages are of considerable importance in explaining thenature and direction of FDIPolitical ideology is animportant determinant of government policy toward FDIMedFirst Instruments, a U.S. company, invests in a manufacturing facility in Mexico. The production from the Mexican facility is used entirely to serve the company's U.S. customers. MedFirst Instruments activity is calledoffshore productionA major reason why many economists remain critical of the infant industry argument is because itmakes the domestic industry inefficientIf Indonesia exports vast quantities of cheap textiles to Italy, selling them at below their costs of production, it would be an example ofdumpingThe group that benefits the most from receiving subsidies isdomestic producersHistorically, most FDI has been directed at thedeveloped nations of the worldThe flow of FDI refers to theamount of FDI undertaken over a given periodMexico has raised the taxes on cheeses imported from the United States. These taxes are an example of a(n)tariffThe principal function of the trade sanctions the United States has in place against Cuba is toimpoverish Cuba to lead to the downfall of the communist governmentMichelin and Goodyear compete against each other not only in the United States, but also all across Europe and Asia. These two tire companies areengaged in multipoint competitionHow do voluntary export restraints affect the prices of goodsVERs always raise the domestic price of an imported goodA charge of 12 to 18 percent is levied by the government of a foreign nation on the value of automobile accessories imported from a neighboring country. This increased the price of those imported car accessories for the consumers. This foreign nation is using a(n)ad valorem tariffWoodCore Inc. produces an entire line of office furniture at its manufacturing facility in the United States and then ships its products for sale to various companies in Europe. WoodCore Inc. is involved inexportingA possible effect of FDI in the form of a greenfield investment in a host country is that itdrives down prices and increases the economic welfare of consumersSome countries limit the amount of sugar that can be imported. This restriction is called a(n)import quotaThe market imperfections approach seeks to explainthe preference for FDI over licensing by firms as a strategy to enter foreign marketsLocation specific advantages do not help explain why firms preferFDI to licensing or to exportingForeign managers trained in the latest management techniques can often help to improve the efficiency of operations in a host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category ofresource-transfer effectsA firm will favor FDI over exporting as an entry strategy whenthe transportation costs or trade barriers are highStrategic trade policygovernment should use subsidies to support promising firms that are active in newly emerging industriesAccording to the radical view of FDI, multinational enterprises (MNEs) that already exist in a country should beimmediately nationalizedAccording the free market view, countries should specialize in the production of those goods and services that they can producemost efficientlyAdministrative trade policiesput in place to make it difficult for imports to enter a countryThe Canadian government decides to offer tax concessions to foreign companies that agree to build a manufacturing facility in Canada. This tax concession is a way toencourage inward FDIThe strategic behavior theory is used toexplain the patterns of FDI flows based on their reflecting strategic rivalry between firms in the global marketplaceFunctions of the foreign exchange market is toconvert currency from one country to another and provide insurance against foreign exchange riskSpot exchange rateexchange rate at which a dealer converts one currency into another currency on a particular dayForeign exchange risk can be reduced by usingforward exchange ratesPPP theoryprice of a basket of particular goods should be roughly equivalent in each countryRate of change on countries' relative prices depends on theirinflation ratesPPP theory of exchange rates yieldinaccurate predictions in short-term movementsInterest rates reflect expectations aboutinflationMost common approach to exchange rate forecasting isfundamental analysis3 types of exposure to foreign exchange risktransaction, translation, and economicGold standardmonetary standard that pegs currencies to gold and guarantees convertibility to goldThe Bretton Woods system of fixed exchange rates wasestablished in 1944, and collapsed in 1973Fixed exchange rate systemcollapsed in 1973, and now the world operates with a floating exchange rate regimeThe volatility of exchange rates under the current managed float system creates bothopportunities and threatsAccording to the law of one price, if the exchange rate between the British pound and the dollar is£1 = $1.50, a jacket that retails for $90 in New York should sell for60 euros in LondonIf many people want euros and euros are in short supply, and few people want Japanese yen and yen are in plentiful supply, the euro is likely todepreciate against the yenTranslation exposureis the impact of currency exchange rates changes on the reported financial statements of a companyWhich of the following is not likely to be a reason for investors to use the global capital marketThey have a higher cost of capital as compared to purely domestic capital marketsWhen currency traders move as a herd in the same direction at the same time, such as whatoccurred when George Soros bet against the British pound in 1992, a(n)bandwagon effect occursPolitical system can be assessed according to two dimensionsthe degree to which they emphasize collectivism as opposed to individualism and the degree to which they are democratic or totalitarianCollectivismis an ideology that view the needs of society as being more important than the needs of the individualIndividualismis an ideology that is built on an emphasis of the primacy of the individual's freedoms in the political, economic, and cultural realmsDemocracy and totalitarianism are atdifferent ends of the political spectrumThree broad types of economic systemsmarket economy, command economy, and a mixed economyDifferences in the structure of law between countries can have important implicationsfor the practice of international businessEthical dilemmas aresituations in which none of the available alternatives seems ethically acceptableEthicsaccepted principles of right or wrong that govern the conduct of a person, members of a profession, or the actions of an organizationFriedman doctrineonly social responsibility of business is to increase profits, as long as the company stays within the rules of lawUtilitarian approachmoral worth of actions or practices is determined by their consequencesKantian ethicspeople should be treated as ends and never as means to the ends of othersRights theorieshuman beings have fundamental rights and privileges that transcend national boundaries and culturesTrade barriers act as aconstraint on a firm's ability to disperse its various production activities to optimal locations around the globe. One response to trade barriers is to establish more production activities in the protected countryValues areabstract ideas about what a society believes to be good, right, and desirableNorms aresocial rules and guidelines that prescribe appropriate behavior in particular situationsValues and norms are influenced bypolitical forces, economic philosophy, social structure, religion, language, and educationThe social structure of a society refers to itsbasic social organizationVirtually all societies are stratified indifferent classesLanguageis one defining characteristic of a cultureHofstede five dimensionspower distance, uncertainty avoidance, individualism versus culturalism, masculinity versus femininity, and long-term versus short-term orientationWhich of these religions has the least relative focus on business activitiesBuddhismWhich of the following statements about the functions of culture is trueprovides link among generationsWhich of the following would be below the waterline of the iceberg model of culturenature of friendshipWhich of the following would be above the waterline of the iceberg model of culturefolk dancingWhich of the following is not a typical reason for expatriate failurelanguage fluencyExpatriates who ignore their foreign experiences are coping with reverse culture shock throughre-socializationWhich of the following is not true of cultureculture is stable and staticA central lesson from the Lincoln Electric case waspractice that works in one country may not automatically work well in anotherApplying Hofstede, a society that scores high on the femininity dimension would tend to emphasizewell-being and high-quality lifestylesCulture is not rooted inpersonalityGiving employees international assignments can help multinational companies in all the following ways exceptreducing the corporate human resources budgetWhich staffing model focuses on deploying talent regardless of employee country of origingeocentricThe social organization of Western society tends to emphasizeindividual achievementAccording to some sociologists, Protestantism played a major role in thedevelopment of capitalism as an economic systemIn managing global teams, fluent speakers of the dominant corporate language shouldlisten activelyIt is not relatively easy totransfer management practices employees in one society to those of anotherPower distance dimensionexplores how a society deals with that fact the people are unequal in capabilities and access to resourcesThe most common method to determine expatriate pay is thebalance sheet approachCulture shock cannot be completely avoided withenough proper preparationAn eagle emblazoned on a seal or a flag is an example of how culture can besymbolicWhich stage of culture shock typically involves the highest levels of frustration and irritation with the new culturedisillusionmentCulture primarily helps people who are members of an organization or society understandwhich actions are considered acceptable and which are considered unacceptableReverse culture shock may result from one or a combination of the following factors exceptFamily and friends did not change at all while the expatriate was awayWe cannot reliably assume that executives who perform well in the home office will alsoperform well in a different cultural setting in an overseas officeTension exists between theneed to reduce costs and the need to be responsive to local conditions, which raises costsProduct can be viewed as abundle of attributesDistribution strategy decision is an attempt todefine the optimal channel for delivering a product to the customerBarriers to international communication includecultural differences, source effects, and noise levelsCommunication strategy is either apush or pull strategyPrice discrimination exists whenconsumers in different countries are charged different prices for the same productMarket segmentationprocess of identifying distinct groups of consumers whose needs, wants, and purchasing behavior differs from each other in important waysCommunication strategyprocess the firm will use in communicating the attributes of its product to prospective customers