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International Business Ch. 2

The term political economy is used to stress the fact that the political, economic, and legal systems of a country are independent of each other. T/F
FALSE
Political systems that emphasize collectivism tend to be democratic, while political systems that place a high value on individualism tend to be totalitarian. T/F
FALSE
Plato did not equate collectivism with equality. T/F
TRUE
Karl Marx advocated state ownership of the basic means of production, distribution, and exchange (i.e., businesses). T/F
TRUE
The social democrats believed that socialism could be achieved only through violent revolution and totalitarian dictatorship. T/F
FALSE
By the mid-1990s, communism was rising worldwide. T/F
FALSE
One of the tenets of collectivism is that the welfare of society is best served by letting people pursue their own economic self-interest. T/F
FALSE
In practical terms, individualism translates into an advocacy for democratic political systems and market economics. T/F
TRUE
The Cold War was in many respects a war between collectivism, championed by the former Soviet Union, and individualism, championed by the United States. T/F
TRUE
In practical terms, collectivism creates a more favorable environment for international businesses to operate in than individualism. T/F
FALSE
In a representative democracy, elected representatives who fail to perform their job adequately cannot be voted out of office at the next election. T/F
FALSE
In a totalitarian country, all the constitutional guarantees on which representative democracies are built—an individual’s right to freedom of expression and organization, a free media, and regular elections—are denied to the citizens. T/F
TRUE
In most democratic states, those who question the right of the rulers to rule find themselves imprisoned, or worse. T/F
FALSE
The governments of China, Vietnam, and Laos are communist in name only because those nations have adopted wide-ranging market-based economic reforms. T/F
TRUE
All right-wing dictatorships display an affinity toward socialist or communist ideas. T/F
FALSE
In countries where individual goals are given primacy over collective goals, we are less likely to find market-based economic systems. T/F
FALSE
In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all dictated by the interaction of demand and supply. T/F
FALSE
Command economies provide a more favorable environment for innovation and entrepreneurs than market economies. T/F
FALSE
Historically, pure market economies were found in communist countries where collectivist goals were given priority over individual goals. T/F
FALSE
A common law system tends to be less adversarial than a civil law system. T/F
FALSE
When law courts interpret civil law, they do so with regard to tradition, precedent, and custom. T/F
FALSE
Contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. T/F
TRUE
Judges under a civil law system have less flexibility than those under a common law system. T/F
TRUE
Islamic law is primarily a moral rather than a commercial law and is intended to govern all aspects of life. T/F
TRUE
Compared to common law system, it is more expensive to draw up contracts in a civil law jurisdiction.
FALSE
By adopting the Contracts for the International Sale of Goods (CIGS), a nation signals to other adopters that it will treat the convention’s rules as part of its law. T/F
TRUE
When firms do not wish to accept the Contracts for the International Sale of Goods, they often opt for arbitration by a recognized arbitration court to settle contract disputes. T/F
TRUE
Private action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders. T/F
FALSE
Bribes are legal payments meant to facilitate performance of duties that the recipients are already obligated to perform. T/F
FALSE
Intellectual property laws stimulate innovation and creative work. T/F
TRUE
The term “public action” refers to the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. T/F
FALSE
International businesses lobby their respective governments to push for international agreements to ensure that intellectual property rights are protected and that the law is enforced. T/F
TRUE
When intellectual property laws are lax, firms are at a greater risk of having their ideas stolen by local entrepreneurs. T/F
TRUE
Liability laws are typically least extensive in highly developed nations. T/F
FALSE
When product safety laws are tougher in a firm’s home country than in a foreign country, the ethical thing to do is to adhere to home-country standards. T/F
TRUE
The benefits, costs, and risks associated with doing business in a country are independent of that country’s political, economic, and legal systems. T/F
FALSE
Other things being equal, a nation with democratic political institutions, is clearly more attractive as a place in which to do business than a nation that lacks democratic institutions. T/F
TRUE
Which of the following systems is a part of the political economy?
Legal system
Which of the following terms best represents the system of government in a nation?
Political system
Which of the following statements is true about political systems?
it is possible to have totalitarian societies that are not collectivist.
When _____ is emphasized, the needs of society as a whole are generally viewed as being more important than individual freedoms.
collectivism
In the country of Normian Republic, an individual’s right to own land is restricted to a large extent on the basis that it runs counter to “the common good.” In this context, which of the following is most likely to be the political system adopted by Normian Republic?
Collectivism
A(n) _____ is a person who believes in public ownership of the means of production for the common good of nation.
socialist
Modern socialism traces its intellectual roots to:
Karl Marx.
Which of the following has been advocated by Karl Marx?
Socialism
In the early twentieth century, the socialist ideology split into two broad camps and the people who believed that socialism could be achieved only through violent revolution and totalitarian dictatorship were referred to as:
communists
_____ attempt to achieve the same ideologies as that of the communists without violent revolution and totalitarian dictatorship.
Social democrats
Which of the following is inconsistent with the Marxist philosophy?
Selling state-owned enterprises to private investors
Which of the following is true about communism?
China has moved sharply away from strict adherence to communist ideology in the economic sphere.
The sale of state-owned enterprises to independent, nonpublic investors is referred to as:
privatization.
Which of the following can be traced to the ancient Greek philosopher, Aristotle?
Individualism
The Cedian government believes that its citizens should have complete freedom in their economic and political pursuits, and the Cedian ideology is “private profit over public good.” In this context, it can be said that Cedia most likely follows the philosophy of:
individualism
_____ argued that private property is more highly productive than communal property and will thus stimulate progress.
Aristotle
In the context of individualism, which of the following is inconsistent with the works of the ancient Greek philosopher Aristotle?
Government dictating what is in best interest of society
Which of the following is most likely to be advocated by individualism?
Communal property is more highly productive than private property.
In practical terms, _____ translates into an advocacy for democratic political systems and free market economics, which in general creates the most favorable environment for international businesses to operate in.
individualism
Which of the following terms refers to a political system in which government is by the people, exercised either directly or through elected representatives?
Democracy
Democracy, in its purest form, is based on the belief that:
citizens should be directly involved in decision making.
In a _____, individuals periodically elected by citizens form a government to make decisions on behalf of the electorate.
representative democracy
_____ is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.
Totalitarianism
A(n) _____ is built upon the ideals of an individual’s right to freedom of expression and organization, a free media, and regular elections.
representative democracy
Which of the following is a feature of representative democracy?
A nonpolitical police force and armed service
In most totalitarian states:
media are heavily censored.
_____ is a form of totalitarianism which advocates that socialism can be achieved only through a totalitarian dictatorship.
Communist totalitarianism
States that limit the freedom of religious expression with laws based on religious principles, most likely follow the political system of:
theocratic totalitarianism.
A totalitarian political system in which a party, group, or individual that represents the interests of a particular ethnic group monopolizes political power is referred to as:
tribal totalitarianism.
_____ generally permits individual economic freedom, but restricts individual political freedom on the grounds that it would lead to the rise of communism.
Right-wing totalitarianism
The fascist regimes that ruled Germany and Italy in the 1930s and 1940s had adopted:
right-wing totalitarianism.
A common feature of many right-wing dictatorships is:
governments that are made up of military officers.
In which countries are we likely to find free market economies?
Countries where individual goals are given primacy over collective goals
A _____ economy is an economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced.
market
Which of the following statements is most likely to be true regarding private ownership?
It gives entrepreneurs an incentive to search for better ways of serving consumer needs.
In a pure _____ economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold.
command
In a _____ economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.
pure command
In comparison to market economies, command economies lack:
dynamism and innovation.
In comparison to pure command economies, free market economies lack:
government control over production and pricing.
In a _____ economy, certain sectors of the economy are left to private ownership and free market mechanisms, while in other sectors there is significant state ownership and government planning.
mixed
In mixed economies, governments sometimes tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests. Once a government takes into state ownership such troubled firms, they are said to be _____.
nationalized
Which of the following is true about the three broad types of economic systems?
In a command economy, state-owned enterprises have little incentive to control costs and be efficient.
The Boldovian government took Sea Lion Inc., a domestic, private shipbuilding firm, into state ownership to save the company from bankruptcy. However, the other private competitors in the shipbuilding industry were raged at this decision of the government. As a result, the government had to reduce the tax burden on all other private shipbuilding firms so that both the state-owned enterprise and private firms could co-exist. According to this information, Boldovia has most likely adopted a _____ economy.
mixed
Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprises, whereas the laws enacted by governments in democratic states, where individualism is the dominant political philosophy, tend to be pro-private enterprise and pro-consumer. This indicates that the:
the legal framework of a country reflects the rulers’ dominant political ideology.
Which of the following is true about legal systems?
The government of a country defines the legal framework within which firms do business.
Which of the following legal systems is most likely to be based on tradition, precedent, and custom?
Common law
In the context of common law, which of the following terms refers to the ways in which laws are applied in specific situations?
Custom
In the context of common law, the term “tradition” most likely refers to the:
legal history of a country.
The common law system enjoys a degree of flexibility not found in other systems because :
it is interpreted by the law courts with regard to tradition, precedent, and custom.
A _____ law system is based on a detailed set of laws organized into codes.
civil
A legal system which is based primarily on religious teachings is referred to as the:
theocratic law system.
_____ is the most widely practiced theocratic legal system in the modern world.
Islamic law
Which of the following law systems is most likely to be used by a law court if it solves a complicated case related to property rights, by basing his judgment on similar, old cases that have come before the courts?
Precedent law system
Which of the following is true about the three main types of legal systems?
Although Islamic law is primarily concerned with moral behavior, it has been extended to cover certain commercial activities.
Jewish law is an example of a _____ law system.
theocratic
_____ are documents that specify the conditions under which an exchange is to occur and details the rights and obligations of the parties involved.
Contracts
Which of the following statements is true about the difference between contracts in common law and civil law systems?
Contracts drafted under a common law system tend to be longer than those drafted under a civil law system.
In comparison to contracts in a civil law system, contracts drafted under a common law framework tend to be:
more specific.
The _____ establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations.
Contracts for the International Sale of Goods
When firms do not wish to accept the rules of the CIGS, they often opt for _____ to settle contract disputes.
arbitration
The bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource are called _____ rights.
property
Which of the following is true about property rights?
In many countries, laws protecting property rights are not enforced by the authorities and the rights are violated.
In the context of property rights, _____ refers to theft, piracy, blackmail, and the like by private individuals or groups.
private action
After the collapse of communism in Dehran, successful business owners often had to pay “protection money” to the mafia or face violent retribution. In the context of property rights, the behavior of the mafia is an example of:
private action.
In the context of property rights, which of the following best exemplifies private action?
Business owners stealing their competitors trade secrets and intellectual properties
When state officials, such as politicians and government bureaucrats, violate property rights by extorting income, resources, or the property itself from property holders, it is described as:
public action.
Which of the following best exemplifies public action?
Government bureaucrats demand bribes from international businesses in return for the rights to operate in Cedia Republic.
The Republic Of Marwa has decided to open its economy to globalization. Which of the following will facilitate this decision of Marwa?
Adopting the Contracts For the International Sale of Goods (CIGS)
Which of the following terms best defines the relationship between the level of corruption and economic growth rate in a country?
Inversely proportional
In the 1970s, the United States passed the _____ following revelations that U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts
Foreign Corrupt Practices Act
In the United States, the Foreign Corrupt Practices Act was passed during the 1970s following revelations that:
U.S. companies had bribed government officials in foreign countries in an attempt to win lucrative contracts.
Which of the following does the U.S. law and OECD convention allow as an exception?
Grease payments or speed money
Small legally acceptable payment made to speed up the issuance of permits or licenses, or process paperwork is typically referred to as a(n):
facilitating payment.
As per the U.S. law and OECD convention, which of the following will most likely to be considered as a grease payment?
Gold Fire Inc. made a small payment of $20 to speed up some paper work related to tax returns in a less developed country.
Grease payments are technically _____.
bribes
Which of the following best exemplifies facilitating or expediting payments in business?
Making small payments to government officials in order to speed up the work they are already obligated to perform
Which of the following is true about grease payments?
Grease payments are technically bribes, however they are distinguishable from bribes.
Products of the mind, such as computer software, a screenplay, a music score, or the chemical formula for a new drug, constitute:
an intellectual property.
Initech Incorporated, a multinational giant, runs a number of diversified businesses. Which of the following can be considered as an intellectual property of the firm?
Innovations and capabilities, and skills of the employees
A _____ grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention.
patent
Silver Tape Corporation has developed a new type of adhesive tape. Which of the following types of legal protections can grant the company exclusive rights for a defined period to the manufacture, use, or sale of the new adhesive tape?
Patent
A composer can protect an original musical score from being copied and sold by someone else by acquiring a(n) _____ for the score.
copyright
Which of the following is most likely to be protected by a copyright?
Movies produced and directed by a person
As a result of _____ protection, the Nike “Swoosh” logo is protected from being used by any other shoe manufacturer.
trademark
Patents, copyrights, and trademarks establish ownership rights over _____ property.
intellectual
Which of the following is a typical function of a trademark?
It allows merchants or manufacturers to designate and differentiate their products.
The philosophy behind intellectual property laws is to:
reward the originator of a new invention, book, musical record, and the like for his or her idea and effort.
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.
The regulations imposed under the _____ agreement, oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.
TRIPS
Strong enforcement of intellectual property laws:
reduces the piracy (theft) of intellectual property.
Product safety and product liability laws are enforced to protect:
consumers
_____ laws hold a firm and its officers responsible when a product causes injury, death, or damage.
Product liability
A boom in product liability suits and awards in the United States resulted in a dramatic increase in the cost of liability insurance. Many business executives argue that this:
makes American businesses less competitive in the global marketplace.
Which of the following statements is true about product safety and liability laws?
Product liability can be much greater if a product does not conform to required safety standards.
Who among the following can claim product liability from the offender?
The airbags in Brian’s car, manufactured by Zigwheels Inc, failed to inflate when his car met with an accident. This injured Brian and damaged the car.
Veronica had been getting red patches on her face after using a protein-based lotion manufactured by Nature Life Research Lab. On consulting a dermatologist, she learnt that the lotion’s steroid levels were beyond the standard levels permitted by the government and the damage caused by the lotion was irreversible. Which of the following will address Veronica’s grievances?
Product liability laws
Which of the following nations is most likely to be unappealing as a place for doing business?
A nation that has a totalitarian political system
If a country wants to improve its attractiveness as a place for doing business and as an investment site, it should:
move toward a market-based system.

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