International Marketing 10th Edition by Michael R. Czinkota - Test Bank

International Marketing 10th Edition by Michael R. Czinkota – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Chapter 5: The Political and Legal Environment

 

TRUE/FALSE

 

1. Political and legal factors often play critical roles in international marketing activities.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   p. 132

OBJ:   LO: 5-1          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

2. In making decisions about a firm’s international marketing activities, managers will need to concentrate on the legal circumstances of the host country but not the home country.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 133

OBJ:   LO: 5-1          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

3. The term “embargo” refers to products that are packaged in one country in a particular way, and then altered to fit the international marketplace in another country.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 134

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

4. Trade sanctions and embargoes can be used interchangeably.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   p. 134

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

5. Economic sanctions that are imposed unilaterally by one country tend to be more effective than those imposed multilaterally by countries.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 135

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

6. One key concern with trade sanctions is the fact that governments often consider them as being free of cost.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 135

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

7. Permitting a foreign national from a controlled country to have access to a highly sensitive computer program in the United States is not considered as an export.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 136

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic | BUSPROG: Technology

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

8. Nuclear nonproliferation is a determinant for export control.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   p. 136

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

9. Today’s export controls use a “strategic balance” approach affecting specific hotspots rather than the “tactical balance” approach.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 137

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

10. Voluntary restraint agreements are self-imposed restrictions aimed at avoiding punitive trade actions from the host.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 140

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

11. Boycotts place a tax on imports and raise prices.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 141

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

12. Political risk can be the result of government action, but it can also be outside the control of government.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 142

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

13. Expropriation is a term used to describe the U.S. government’s investment in foreign technology with the intent to spur development of trade partners.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

14. Code law is based on tradition and depends less on written statutes than on precedent and custom.

 

ANS:  F                    PTS:   1                    DIF:    Easy               REF:   p. 147

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

15. Countries with the common law system have much more rigid laws than those with the code law system.

 

ANS:  F                    PTS:   1                    DIF:    Easy               REF:   p. 147

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

16. Lobbyists are well-connected individuals and firms that can provide access to policymakers and legislators.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   p. 150

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

17. If supply chains are complex and multinational, the effects of terrorism can potentially spread across the globe from an initially local focus.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 155

OBJ:   LO: 5-5          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

18. Corporate governance frameworks ensure the board of directors’ accountability to the company and its shareholders.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 157

OBJ:   LO: 5-5          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

19. As firms become increasingly multinational, governments respond by increasing global cooperation to achieve the same principles of taxation and corporate ethics laws across nations.

 

ANS:  T                    PTS:   1                    DIF:    Moderate        REF:   p. 158

OBJ:   LO: 5-5          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

20. Bribing foreign officials in order to gain contracts is considered permissible in the United States.

 

ANS:  F                    PTS:   1                    DIF:    Moderate        REF:   p. 161

OBJ:   LO: 5-5          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

MULTIPLE CHOICE

 

1. When products and goods enter a market in ways not desired by their manufacturers, this is known as _____ market activities.

a.	black
b.	white
c.	green
d.	gray

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   p. 133

OBJ:   LO: 5-1          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

2. _____ refer to governmental actions that distort the free flow of trade in goods, services, or ideas for decidedly adversarial and political, rather than strictly economic, purposes.

a.	Gray market activities
b.	Tariffs and barriers
c.	Trade sanctions and embargoes
d.	Expropriation and confiscation

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        REF:   p. 134

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

3. The charter of the United Nations allows for sanctions as an enforcement action by regional agencies. Which of the following is NOT an example of a regional agency?

a.	The Organization of American Unity
b.	The Organization of African Unity
c.	The Organization of American States
d.	The Arab League

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        REF:   p. 134

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Application

 

4. When the United Nations (UN) votes on economic sanctions for a country:

a.	it will apply only to nations who are members of the UN.
b.	any permanent member of the Security Council can veto the sanctions.
c.	the government must consider them as being free of cost.
d.	a new set of rules must be written for the specific infractions.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    REF:   p. 134

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

5. _____ are designed to deny or at least delay the acquisition of strategically important goods by adversaries.

a.	Antidumping laws
b.	Export control systems
c.	Voluntary restraint agreements
d.	Domestication activities

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   p. 135

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

6. Which of the following is an example of a dual-use item?

a.	Handbags
b.	Life jackets
c.	Compact cars
d.	Artillery

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    REF:   p. 135

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Application

 

7. Which of the following is true about export controls?

a.	The legal basis for export controls is similar across nations.
b.	All export control systems make controls the rule rather than exception.
c.	The U.S. export control system is based on the Export Administration Act.
d.	Services and ideas are not covered under export controls.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        REF:   p. 136

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

8. As required by government mandate, anyone wishing to export a product from the United States needs a(n) _____.

a.	extended collective license
b.	quasi-contract
c.	voluntary export restraint agreement
d.	export license

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   p. 136

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

9. Which of the following is NOT a method of controlling imports?

a.	Confiscation
b.	Quota systems
c.	Voluntary restraint agreements
d.	Tariffs

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   p. 140

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

10. When firms refuse to do business with someone, often for political reasons, this is known as _____.

a.	image tarnishing
b.	expropriation
c.	boycotting
d.	confiscation

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 141

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic | BUSPROG: Diversity

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

11. Which of the following is true about import controls?

a.	Nontariff barriers like voluntary restraint agreements are self-imposed restrictions and cutbacks aimed at avoiding punitive trade actions from the host.
b.	Import controls generally exact a small price from domestic consumers.
c.	The social cost of import controls benefits the economy in all situations.
d.	Import controls improve the productivity of an industry, provide it with a level of safety and a cushion of increased income, and lead the drive for technological advancement.

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   p. 140

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

12. Which of the following is NOT considered a political risk?

a.	Deflation
b.	Tariffs
c.	Expropriation of assets
d.	Restriction in repatriation of profits

 

 

ANS:  A                    PTS:   1                    DIF:    Moderate        REF:   p. 142

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

13. In the United States, the _____ excludes from antitrust prosecution those firms that are cooperating to develop foreign markets.

a.	Gramm-Leach-Bliley Act
b.	Sarbanes-Oxley Act
c.	Webb-Pomerene Act
d.	Celler-Kefauver Act

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 141-142

OBJ:   LO: 5-2          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

14. Events caused by factors outside the control of government include all of the following EXCEPT:

a.	confiscation.
b.	strikes.
c.	extortion.
d.	revolution.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

15. The seizure of foreign assets by a government with payment of compensation to owners is known as _____.

a.	asset forfeiture
b.	misappropriation
c.	expropriation
d.	dissolution

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

16. _____ results in a transfer of ownership from the foreign firm to the host country without providing compensation for the firm.

a.	Defalcation
b.	Injunction
c.	Confiscation
d.	Structuring

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

17. Which of the following is true about expropriation?

a.	Its use as a policy tool has increased significantly over time.
b.	It does not provide compensation to the former owners.
c.	It immediately transfers a certain amount of wealth and resources from foreign companies to the host country.
d.	It provides satisfactory settlements and thus encourages foreign firms to invest in the country.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

18. _____ occurs when a government demands partial transfer of ownership and management responsibility and imposes regulations to ensure that a large share of the product is locally produced and a larger share of the profit is retained in the country.

a.	Injunction
b.	Defalcation
c.	Domestication
d.	Structuring

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 143 | p. 145

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

19. Which of the following is true about domestication?

a.	It imposes regulations to ensure that no profits are retained by the host country.
b.	It results in inefficiencies due to lack of market discipline, and thus affects the international competitiveness of operations abroad.
c.	It results in total ownership and total management responsibility being conferred on the host country.
d.	It imposes regulations to ensure that all high-end products are locally produced while all low-end products are produced by the host country.

 

 

ANS:  B                    PTS:   1                    DIF:    Challenging    REF:   p. 145

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

20. Confiscation differs from domestication in that confiscation:

a.	does not involve transfer of ownership from the foreign firm to the host country.
b.	offers compensation in the form of local, nontransferable currency.
c.	does not provide compensation to the foreign firm.
d.	provides compensation on the book value of the firm.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   p. 143

OBJ:   LO: 5-4          NAT:  BUSPROG: Reflective Thinking

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

21. Many adverse governmental actions are a result of a host country’s opposition to _____.

a.	domestication
b.	colonial remnants
c.	independence
d.	nationalism

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   p. 146

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

22. Which of the following statements about legal differences and restraints is true?

a.	All countries conform to the same laws, and they are implemented similarly as well.
b.	Many common law countries have adopted commercial codes to govern the conduct of business.
c.	Countries with the common law system have much more rigid laws than those with the code law system.
d.	The enforcement of laws have the same effect on national and on foreign marketers.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        REF:   p. 147

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

23. Which of the following is true about common law?

a.	It depends primarily on written statutes and codes.
b.	It is based on Roman law and is found in the majority of the nations of the world.
c.	Countries with the common law system have much more rigid laws than those with the code law system.
d.	It is based on tradition and depends on precedent and custom.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        REF:   p. 147

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

24. Code law differs from common law in that code law:

a.	is based solely on tradition.
b.	originated in England.
c.	is based on a comprehensive set of written statements.
d.	depends on precedent and custom.

 

 

ANS:  C                    PTS:   1                    DIF:    Moderate        REF:   p. 147

OBJ:   LO: 5-3          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

25. Laws that prohibit below-cost sales of products are known as _____ laws.

a.	antidiscrimination
b.	antikickback
c.	antidumping
d.	antideficiency

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 147

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

26. Which of the following is true about the legal procedures preferred by businesses?

a.	Businesses who opt for conciliation fear discrimination in foreign countries and therefore avoid it.
b.	Arbitration often involves extensive delays and is very costly, and hence is not preferred by businesses.
c.	Litigation results in much quicker decisions than arbitration, and hence is preferred by businesses.
d.	Arbitration results in much quicker decisions, and hence is more preferred by businesses.

 

 

ANS:  D                    PTS:   1                    DIF:    Moderate        REF:   p. 152

OBJ:   LO: 5-3          NAT:  BUSPROG: Reflective Thinking | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

27. The phenomenon when buyers become uncertain about the state of their nation’s economy, leading to a sharp reduction in demand for both consumer and industrial goods is known as _____.

a.	the chill effect
b.	functional lubrication
c.	domestication
d.	expropriation

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   p. 153

OBJ:   LO: 5-5          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

28. The relationships among stakeholders that determine and control the strategic direction and performance of an organization are called _____.

a.	investor relations
b.	corporate governance
c.	ownership risk
d.	functional lubrication

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   p. 157

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

29. Which of the following is a characteristic of a market-based corporate governance regime?

a.	Combined management and ownership
b.	Dispersed ownership
c.	State ownership of enterprise
d.	Family control

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   p. 157

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

30. State ownership of enterprise, lack of transparency, and no minority influence are characteristics of a _____ corporate governance regime.

a.	market-based
b.	bank-based
c.	family-based
d.	government affiliated

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   p. 157

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic | BUSPROG: Diversity

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

31. Which of the following refers to a legal entitlement of exclusive rights to use an idea, piece of knowledge, or invention?

a.	Domestication
b.	Embargoes
c.	Intellectual property
d.	Functional lubrication

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 160

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

32. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS):

a.	includes maximum standards for copyrights, appellations of geographic origin, industrial designs, trademarks, and trade secrets.
b.	gives developing countries more time to implement changes related to intellectual property.
c.	requirements apply equally to all WTO member states except emerging countries.
d.	gives individuals and companies the right to own and sell property as they see fit.

 

 

ANS:  B                    PTS:   1                    DIF:    Moderate        REF:   p. 160

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Comprehension

 

33. Which act passed in 1977 made it a crime for U.S. firms to bribe foreign officials for business purposes?

a.	The Organized Crime Control Act
b.	The Racketeer Influenced and Corrupt Organizations Act
c.	The Foreign Corrupt Practices Act
d.	The Foreign Intelligence Surveillance Act

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   p. 161

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

34. Which 2002 law protects investors by improving the accuracy and reliability of corporate disclosures, and also covers issues like corporate responsibility, financial transparency, and accounting oversight?

a.	The Glass-Steagall Act
b.	The Aldrich-Vreeland Act
c.	The Gramm-Leach-Bliley Act
d.	The Sarbanes-Oxley Act

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   p. 162

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic | BUSPROG: Ethics

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

35. Which of the following best describes “ehrbarer Kaufmann”?

a.	It refers to a legal entitlement of exclusive rights to use an idea, piece of knowledge, or invention.
b.	It refers to governmental actions that distort the free flow of trade in goods, services, or ideas for decidedly adversarial and political, rather than strictly economic, purposes.
c.	It is a key legal perspective that has faith and belief as its key focus and is also a mix of societal, legal, and spiritual guidelines.
d.	It focuses on maintaining long-term successful international trade efforts with distant and often unfamiliar people.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   p. 163

OBJ:   LO: 5-4          NAT:  BUSPROG: Analytic

STA:   DISC: International Perspective       KEY:  Bloom’s: Knowledge

 

ESSAY

 

1. Explain the different problems encountered by policymakers when trying to administer import controls.

 

ANS:

Policymakers are faced with several problems when trying to administer import controls. First, most of the time such controls exact a huge price from domestic consumers. Even though the wide distribution of the burden among many consumers may result in a less obvious burden, the social cost of these controls may be damaging to the economy and subject to severe attack by individuals. A second major problem resulting from import controls is the downstream change in import composition that results from these controls. Initially narrowly defined protectionist measures may have to snowball in order to protect one downstream industry after another. A final major problem that confronts the policymaker is that of efficiency. Import controls, which are frequently designed to provide breathing room to a domestic industry either to grow or to recapture its competitive position, often turn out not to work. Rather than improve the productivity of an industry, such controls provide it with a level of safety and a cushion of increased income yet let the drive for technological advancement fall behind. Alternatively, supply may respond to artificial stimulation and grow far beyond demand.

 

PTS:   1                    DIF:    Challenging    REF:   p. 140-141      OBJ:   LO: 5-2

NAT:  BUSPROG: Analytic                       STA:   DISC: International Perspective

KEY:  Bloom’s: Comprehension

 

2. Describe political risk and the different types of political risk.

 

ANS:

Political risk is defined as the risk of loss when investing in a given country caused by changes in a country’s political structure or policies, such as tax laws, tariffs, expropriation of assets, or restriction in repatriation of profits. In general, political risk is lowest in countries that have a history of stability and consistency. Political risk tends to be highest in nations that do not have this sort of history. Three major types of political risk can be encountered: ownership risk, which exposes property and life; operating risk, which refers to interference with the ongoing operations of a firm; and transfer risk, which is mainly encountered when attempts are made to shift funds between countries.

 

PTS:   1                    DIF:    Moderate       REF:   p. 142             OBJ:   LO: 5-4

NAT:  BUSPROG: Analytic                       STA:   DISC: International Perspective

KEY:  Bloom’s: Comprehension

 

3. Briefly explain the effects of terrorism on business.

 

ANS:

Terrorism is the systematic use (or threat) of violence aimed at attaining a political goal and conveying a political message. International terrorism seeks to do this across national borders. Terrorists direct their strikes at business far more than any other target. Businesses need to be easily accessible and able to conduct transactions with many new persons every day; this introduces a level of vulnerability that is not typically encountered by government offices. Bombings are most common, followed by armed assaults, kidnapping, vandalism, and hijacking. Terrorism nevertheless creates new opportunities for firms in a few industries like construction, security, and information technology. For most companies, however, terrorism also results in reduced revenues or increased costs, and managers must prepare for this. Terrorists intend to affect supply and demand in order to shatter existing economic systems; this brings about both direct and indirect effects. The direct consequences to business are the immediate costs levied on individual firms. While harm is clear to individual firms, from a societal perspective the direct effects tend to be less consequential than the indirect ones. The indirect negative consequences of terrorism begin with macroeconomic phenomena, such as the real or perceived decline in per capita income, purchasing power, and stock market values.A further effect on enterprises may be the failures in power, communication, transport, and other infrastructure due to actual physical damage incurred at the terrorists’ hands. Indirectly, this leads to unpredictable shifts and interruption in the supply of inputs, resources, and services. Finally, international terrorism often causes tension between the countries whose citizens or property is involved; the deterioration of transnational relationships can affect foreign buyer and seller attitudes and thus the marketing activities of firms doing business abroad.

 

PTS:   1                    DIF:    Challenging    REF:   p. 152-153      OBJ:   LO: 5-5

NAT:  BUSPROG: Analytic                       STA:   DISC: International Perspective

KEY:  Bloom’s: Comprehension