Incoterms 2010 and International Business - 101
Incoterms 2010 and International Business - 101
International Business: The Challenges of Globalization, 8th Edition, Wild & Wild
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International Business, 8e (Wild/Wild)
Chapter 3 Political Economy and Ethics
1) In ________ cultures, economic systems tend to provide incentives and rewards for a person's private business initiatives.
A) individualist
B) high uncertainty avoidance
C) feminine
D) large power distance
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
2) Which of the following political ideologies states that every aspect of people's lives must be controlled for a nation's political system to be effective?
A) totalitarianism
B) capitalism
C) anarchism
D) pluralism
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
3) Under a(n) ________ political system, the state reigns supreme over institutions such as family, religion, business, and labor.
A) pluralistic
B) totalitarian
C) democratic
D) anarchist
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
4) Totalitarian political systems include authoritarian regimes such as ________.
A) democracy and theocracy
B) anarchism and pluralism
C) communism and fascism
D) capitalism and secularism
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
5) ________ is the belief that only individuals and private groups should control a nation's political activities.
A) Pluralism
B) Anarchism
C) Theocracy
D) Totalitarianism
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
6) ________ is the belief that both private and public groups play important roles in a nation's political activities.
A) Totalitarianism
B) Capitalism
C) Anarchism
D) Pluralism
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
7) ________ political systems include democracies, constitutional monarchies, and some aristocracies.
A) Totalitarian
B) Anarchist
C) Fascist
D) Pluralistic
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
8) Konesia is a country whose political leaders do not tolerate opposing viewpoints and often suppress or punish dissidents. The lives of Konesians are tightly controlled by its rulers. Which of the following political systems prevails in the country?
A) totalitarianism
B) democracy
C) anarchism
D) pluralism
Answer: A
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Moderate
LO: 3.1: Describe the key features of each form of political system.
9) Which of the following is a characteristic of totalitarian governments?
A) Political dissidents can oppose the government with no repercussions.
B) Citizens are guaranteed civil, property, and minority rights.
C) The means of production are owned by the people who use them.
D) Leaders rule without the explicit approval of the people.
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
10) A ________ is a political system in which a country's religious leaders serve as its political leaders.
A) democracy
B) theocracy
C) plutocracy
D) septocracy
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
11) Renzi belongs to a country in which religion governs all aspects of his life, whether personal or public. He has to abide by a strict, rigid, code that dictates everything from the clothes he wears to the food he eats. Breaking away from these traditions is not an option since religion plays an important role in the functioning of the nation. What political system prevails in his country?
A) communist totalitarianism
B) left-wing totalitarianism
C) right-wing totalitarianism
D) theocratic totalitarianism
Answer: D
AACSB: Analytical thinking; Ethical understanding and reasoning
Skill: Application
Difficulty: Moderate
LO: 3.1: Describe the key features of each form of political system.
12) ________ is a political system in which political leaders rely on military and bureaucratic power to support their rule.
A) Secular totalitarianism
B) Secular anarchism
C) Theocratic totalitarianism
D) Theocratic pluralism
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
13) Under ________ the government endorses private ownership of property and a market-based economy but grants little or no political freedom.
A) left-wing totalitarianism
B) theocratic totalitarianism
C) secular totalitarianism
D) right-wing totalitarianism
Answer: D
AACSB: Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
14) Which of the following terms is also used to refer to communism?
A) tribal totalitarianism
B) right-wing totalitarianism
C) left-wing totalitarianism
D) civil totalitarianism
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
15) Which of the following is an advantage of conducting business in totalitarian nations?
A) International companies are less likely to face local political opposition to their activities.
B) Government deals are always straightforward and transparent.
C) Laws regarding the resolution of contractual disputes are clearly defined.
D) International companies run no risk of their public image being tarnished.
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
16) Which of the following is a disadvantage of conducting business in totalitarian nations?
A) Laws regarding the resolution of contractual disputes are rigid and inflexible.
B) Companies have to contend with the interference of local political opposition.
C) A refusal to pay a bribe can result in the forfeiture of investments in the country.
D) The government has little power over the economic activities of the nation.
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
17) A ________ is a political system in which government leaders are elected directly by the wide participation of the people or by their representatives.
A) democracy
B) theocracy
C) plutocracy
D) autocracy
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
18) Which of the following statements about representative democracies is true?
A) All citizens participate freely and actively in political processes.
B) Leaders of representative democracies can stay in power indefinitely.
C) Citizens elect individuals from political groups to act on their behalf.
D) Representative democracies across the world share identical features.
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
19) In a ________ government, the strongest political parties share power by dividing government responsibilities among themselves.
A) coalition
B) bilateral
C) totalitarian
D) theocratic
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
20) Democracies try to preserve peaceful coexistence among groups of people with diverse cultural, ethnic, and racial backgrounds. These rights are known as ________ rights.
A) indirect
B) central
C) subcapital
D) minority
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
21) The government maintains control over the banking industry in a country. Which of the following is most likely true if the country has a mixed economy?
A) Businesses in most economic sectors of the country are privately owned.
B) The government considers banking sector as important to national security.
C) The country has never experienced threats against its long-term stability.
D) The government views banking as more important than manufacturing.
Answer: B
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 3.1: Describe the key features of each form of political system.
22) Which of the following do governments impose upon people to help pay for the consequences of using a particular product?
A) income taxes
B) consumption taxes
C) property taxes
D) value-added taxes
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
Scenario: Susan Goes Global with Grape Fizz
Susan is the CEO of Grape Fizz, a global drinks-manufacturing company. She wishes to set up production facilities in other countries and has been advised to assess the political system of each country before she does so.
23) Susan decides not to set up production facilities in Konesia because its business laws are vague and are often interpreted according to the convenience of the government. Bribery is a common feature in conducting business deals there and a refusal to pay up is not an option. What kind of government does Konesia have?
A) democratic
B) theocratic
C) totalitarian
D) pluralist
Answer: C
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
24) Susan also decides not to set up production facilities in Margazo, a country which functions by a strict set of religious tenets, because some of them contradict her company's work policy. Expecting potential employees to break away from these traditions is not an option since religion plays an important role in the functioning of the nation. What kind of political system prevails in Margazo?
A) pluralistic
B) theocracy
C) tribal totalitarian
D) democracy
Answer: B
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
25) In a totalitarian system, rulers tightly control people's lives and do not tolerate opposing viewpoints.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
26) Anarchism is the belief that every aspect of people's lives must be controlled in order for a nation's political system to be effective.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
27) Pluralism is the belief that only individuals and private groups should control a nation's political activities.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
28) Pluralistic political systems include authoritarian regimes such as communism and fascism.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
29) When a country's religious leaders are also its political leaders, its political system is called a theocracy.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
30) Pluralism is a political system in which political leaders rely on military and bureaucratic power.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
31) Secular totalitarianism is a political system in which government leaders are elected directly by the wide participation of the people or their representatives.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
32) The most peaceful nations today are those that were once controlled and stabilized by colonial powers.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
33) In a coalition government, the strongest political parties share power by dividing government responsibilities among themselves.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
34) The bureaucracy is the part of government that implements the rules and laws passed by elected representatives.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
35) Economic socialism won the battle over communist totalitarianism and capitalism.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
36) Incentives and rewards for individual business initiatives are an important aspect of collectivist cultures.
Answer: TRUE
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Moderate
LO: 3.1: Describe the key features of each form of political system.
37) Totalitarian governments tend to favor private ownership of economic resources.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
38) Compare and contrast the world's three main political ideologies: anarchism, totalitarianism, and pluralism.
Answer: Totalitarianism is the belief that every aspect of people's lives must be controlled for a nation's political system to be effective. Totalitarianism disregards individual liberties and treats people as slaves of the political system. The state reigns supreme over institutions such as family, religion, business, and labor. Totalitarian political systems include authoritarian regimes such as communism and fascism.
Anarchism is the belief that only individuals and private groups should control a nation's political activities. An anarchist views public government as unnecessary and unwanted because it tramples personal liberties.
Pluralism is the belief that both private and public groups play important roles in a nation's political activities. Each group (consisting of people with different ethnic, racial, class, and lifestyle backgrounds) serves to balance the power that can be gained by the other. Pluralistic political systems include democracies, constitutional monarchies, and some aristocracies.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.1: Describe the key features of each form of political system.
39) Compare and contrast two prevalent political systems: totalitarianism and democracy, and explain how a country's political system influences its legal system.
Answer: In a totalitarian system, individuals govern without the support of the people, tightly control people's lives, and do not tolerate opposing viewpoints. Nazi Germany under Adolf Hitler and the former Soviet Union under Joseph Stalin are historical examples of totalitarian governments. Today, Myanmar and North Korea are prominent examples of totalitarian governments. Totalitarian leaders attempt to silence those with opposing political views and, therefore, require the near-total centralization of political power. But a "pure" form of totalitarianism is not possible because no totalitarian government is capable of entirely silencing all its critics.
A democracy is a political system in which government leaders are elected directly by the wide participation of the people or by their representatives. Democracy differs from totalitarianism in nearly every respect. The foundations of modern democracy go back at least as far as the ancient Greeks. The Greeks tried to practice a pure democracy, one in which all citizens participate freely and actively in the political process. But a pure democracy is more an ideal than a workable system for several reasons. Some people have neither the time nor the desire to get involved in the political process. Also, citizens are less able to participate completely and actively as a population grows and as the barriers of distance and time increase. Finally, leaders in a pure democracy may find it difficult or impossible to form cohesive policies because direct voting can lead to conflicting popular opinion.
A country's political system also influences its legal system. Totalitarian governments tend to favor public ownership of economic resources and enact laws limiting entrepreneurial behavior. By contrast, democracies tend to encourage entrepreneurial activity and protect business with strong property-rights laws. The rights and responsibilities of parties to business transactions also differ from nation to nation. Political systems and legal systems, therefore, are naturally interlocked. A country's political system inspires and endorses its legal system, and its legal system legitimizes and supports its political system.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 3.1: Describe the key features of each form of political system.
40) Central planning is rooted in the ideology that ________.
A) the welfare of a group is more important than individual well-being
B) individual concerns should be placed above group consensus
C) individual and group concerns are just as important as government concerns
D) privatization will enhance a country's economic well-being
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 3.2: Explain how the three types of economic systems differ.
41) Which of the following statements is true of a centrally planned economy?
A) Individual concerns are as important as the government's concerns.
B) Consumers determine the prices of products and labor.
C) Factories are privately owned.
D) The government sets the production goals.
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 3.2: Explain how the three types of economic systems differ.
42) Which of the following disagrees with the concept of centrally planned economies?
A) At the time of their collapse, standards of living in most centrally planned economies were at or above those of market economies.
B) Basic necessities were often not provided to citizens in centrally planned economies.
C) Underground economies for goods and services thrived in most centrally planned economies.
D) Prices on the black market were much higher than the official prices set by governments.
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 3.2: Explain how the three types of economic systems differ.
43) Which of the following terms refers to an economic system in which the government owns and controls all types of economic activity?
A) socialism
B) sovereign nationalism
C) political bureaucracy
D) pluralism
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
44) Robert believes that social and economic equality can be obtained only by establishing an economic system in which the government owns and controls all types of economic activity. However, he does not think of himself as a communist, but as a socialist. Which of the following statements about Robert is true?
A) Robert does not believe that a violent revolution is needed to seize control over resources.
B) Robert does not think that political dissidents should go unpunished.
C) Robert believes that the pricing of goods should be left to the discretion of laborers.
D) Robert believes that the means of production should be owned by the people who use them.
Answer: A
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Hard
LO: 3.2: Explain how the three types of economic systems differ.
45) Both Pat and Terry believe that social and economic equality can be obtained only by establishing an economic system in which the government owns and controls all types of economic activity. Which of the following statements proves that Pat is a communist and Terry is a socialist?
A) Unlike Terry, Pat believes that the government should decide the prices at which goods are sold.
B) Unlike Pat, Terry does not believe in the elimination of political opponents.
C) Unlike Terry, Pat believes that the means of production should be owned only by the public.
D) Unlike Pat, Terry believes that a violent revolution is necessary to seize control over resources.
Answer: B
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Hard
LO: 3.2: Explain how the three types of economic systems differ.
46) What do communists and socialists have in common?
A) Both believe in the elimination of political opponents.
B) Both believe that the government should control all types of economic activity.
C) Both believe that the pricing of goods should be the responsibility of individuals.
D) Both believe that a violent revolution is necessary to seize control over resources.
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
47) The segment of the economic environment comprising independently owned firms that seek to earn profits is called the ________.
A) political sector
B) private sector
C) democratic sector
D) public sector
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
48) Which of the following philosophies asserts that ownership of the means of production belongs in the hands of individuals and private businesses?
A) capitalism
B) communism
C) tribalism
D) socialism
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
49) In a market economy, access to alternative purchase options is known as ________.
A) price-sensitivity
B) economic transition
C) laissez-faire
D) free choice
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
Scenario: Susan Goes Global with Grape Fizz
Susan is the CEO of Grape Fizz, a global drinks-manufacturing company. She wishes to set up production facilities in other countries and has been advised to assess the political system of each country before she does so.
50) Susan thinks that it would be easiest setting up production facilities in a country whose government leaders are elected directly by the wide participation of the people or by their representatives. Which of the following political systems should the country have?
A) anarchist
B) democratic
C) theocratic
D) facist
Answer: B
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
51) A value-added tax is a tax levied on each party that adds value to a product throughout its production and distribution.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
52) Describe the three main types of economic systems.
Answer: A country's economic system consists of the structure and processes that it uses to allocate its resources and conduct its commercial activities. Every economy displays a tendency toward individualist or collectivist economic values. If national economies are arranged on a horizontal scale that is anchored by two extremes, at one end of the scale is a theoretical pure centrally planned economy, at the other end is a theoretical pure market economy, and in between is a mixed economy.
A centrally planned economy is a system in which a nation's land, factories, and other economic resources are owned by the government. The government makes nearly all economy-related decisions–including who produces what and the prices of products, labor, and capital. Central planning agencies specify production goals for factories and other production units, and they even decide prices. The ultimate goal of central planning is to achieve a wide range of political, social, and economic objectives by taking complete control over the production and distribution of a nation's resources.
A mixed economy is a system in which land, factories, and other economic resources are rather equally split between private and government ownership. In a mixed economy, the government owns fewer economic resources than does the government in a centrally planned economy. Yet in a mixed economy, the government tends to control the economic sectors that it considers important to national security and long-term stability. Many mixed economies also maintain generous welfare systems to support the unemployed and provide health care for the general population.
In a market economy, the majority of a nation's land, factories, and other economic resources are privately owned, either by individuals or businesses. This means that who produces what and the prices of products, labor, and capital in a market economy are determined by the interplay of two forces: supply and demand. Market economics is rooted in the belief that individual concerns should be placed above group concerns.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 3.2: Explain how the three types of economic systems differ.
53) Discuss the factors that contributed to the collapse of centrally planned economies.
Answer: Centrally planned economies collapsed due to the following reasons. First, they failed to create economic value. They failed to see that commercial activities succeed when they create economic value for customers. Along the way, scarce resources were wasted in the pursuit of commercial activities that were not self-sustaining.
Second, they failed to provide incentives for economic success. Government ownership of economic resources drastically reduced incentives for businesses to maximize the output obtained from those resources. Except for aerospace, nuclear power, and other sciences (in which government scientists excelled), there were few incentives to create new technologies, new products, and new production methods. The result was little or no economic growth and consistently low standards of living.
Third, they failed to achieve rapid growth. Leaders in communist nations took note of the high rates of economic growth in countries such as Hong Kong, Singapore, South Korea, and Taiwan–called Asia's four tigers. That a once-poor region of the world had so rapidly achieved such astounding growth awakened central planners to the possibilities. They realized that an economic system based on private ownership fosters growth much better than one hampered by central planning.
Finally, centrally planned economies failed to satisfy consumer needs. People in centrally planned economies were tired of a standard of living that had slipped far below that found in market economies. Ironically, although central planning was conceived as a means to create a more equitable system of distributing wealth, too many central planners failed to provide even basic necessities such as adequate food, housing, and medical care.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 3.2: Explain how the three types of economic systems differ.
54) Discuss the challenges China faces as it continues its experiment on "socialism with Chinese characteristics."
Answer: Three factors have posed challenges for China in its transition to a market economy. First, political and social problems pose threats to China's future economic performance. For the most part, political leaders restrict advanced democratic reforms. Protests sporadically arise from time to time whenever ordinary Chinese citizens grow impatient with political progress.
Another potential problem is unemployment. Intensified competition and the entry of international companies into China are placing greater emphasis on efficiency and the cutting of payrolls in some industries. But the biggest contributor to the unemployed sector seems to be migrant workers. Hundreds of thousands of workers have left their farms and now go from city to city searching for better-paying factory work or construction jobs.
Another key issue is reunification of "greater China." China regained control of Hong Kong in 1997 after 99 years under British rule. For the most part, China has kept its promise of "one country, two systems." Although the economic freedoms of people in Hong Kong have remained largely intact, the rest of China has continued along lines drawn by the communist leadership.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 3.2: Explain how the three types of economic systems differ.
55) Explain the benefits and drawbacks of a value-added tax.
Answer: Many countries impose a value added tax (VAT)–a tax levied on each party that adds value to a product throughout its production and distribution. The United States has not previously implemented a VAT tax, but the nation's considerable debt level is causing speculation that it may soon impose one. Supporters of the VAT system contend that it distributes taxes on retail sales more evenly between producers and consumers. Consumers pay no additional tax at the point of sale because the government has already collected taxes from each party in the value chain. Still, consumers end up paying the tax because producers and distributors must increase prices to compensate for their tax burdens. So the poor are not overly burdened, many countries exclude the VAT on certain items such as children's clothing.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.2: Explain how the three types of economic systems differ.
56) The U.S. legal system is largely based on ________.
A) common law
B) social law
C) civil law
D) theocratic law
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
57) Under ________ law, the justice system decides cases by interpreting the law on the basis of tradition, precedent, and usage.
A) civil
B) international
C) common
D) theocratic
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
58) ________ is a legal system which is based on a detailed set of written rules and statutes that constitute a legal code.
A) International law
B) Civil law
C) Tribal law
D) Common law
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
59) A legal tradition based on religious teachings is called ________ law.
A) democratic
B) common
C) civil
D) theocratic
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
60) Laws designed to prevent companies from fixing prices, sharing markets, and gaining unfair monopoly advantages are called ________.
A) antitrust laws
B) theocratic laws
C) anarchist laws
D) bilateral laws
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
Scenario: Susan Goes Global with Grape Fizz
Susan is the CEO of Grape Fizz, a global drinks-manufacturing company. She wishes to set up production facilities in other countries and has been advised to assess the political system of each country before she does so.
61) Susan is worried that San Tarino's demand that she must use locally available raw material and employ local workers might interfere with the quality and efficiency of her business. San Tarino, on the other hand, views this as a way to foster local business activity and lessen regional unemployment. What are these laws called?
A) local content requirements
B) antitrust laws
C) nationalization laws
D) internalization policies
Answer: A
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Moderate
LO: 3.3: Summarize the main elements of each type of legal system.
Scenario: Stephanie Wong
Stephanie Wong, a Chinese-American, owns a consultancy that advises clients on strategies for business expansions into China. Wong is to lead a symposium for small and mid-sized exporters who are planning on expanding their businesses in China. Therefore, she is preparing answers in advance for questions that symposium participants would most likely ask.
62) The first question that Stephanie expects participants to ask is: "Which is more important for the Chinese, contacts or contracts?" Which of the following is the most effective response Stephanie could give for this question?
A) Contracts are critical because of their extreme importance in Chinese business.
B) Face-to-face communications and personal relationships take priority over written contracts.
C) Non-Chinese businesspeople should take time to agree on a legal contract before developing personal relationships.
D) Business relationships are established only after successful legal dealings are concluded.
Answer: B
AACSB: Reflective thinking
Skill: Critical Thinking
Difficulty: Moderate
LO: 3.3: Summarize the main elements of each type of legal system.
63) Which of the following factors should the legal experts of Wayne's consider while evaluating the legal systems of Paribo and Kirawi?
A) the profits made by local companies in the countries
B) the prevalence of crime in the two countries
C) the resolution of contractual dispute with local vendors
D) the profits made by international companies in other countries
Answer: C
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Hard
LO: 3.3: Summarize the main elements of each type of legal system.
64) Which of the following statements is true of Kirawi, a democratic nation whose legal system is based on common law?
A) The law is based on religious teachings and is enforced by the country's religious leaders.
B) The law is inflexible and is applied the same way in all situations.
C) The law is based on a detailed set of written rules that constitute a legal code.
D) The law is interpreted on the basis of tradition, precedent and usage.
Answer: D
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
65) Which of the following statements is true of Paribo, a democratic nation whose legal system is based on civil law?
A) The law is based on religious teachings and is enforced by the country's religious leaders.
B) The law is flexible and its interpretations differ with situations.
C) The law is based on a detailed set of written rules that constitute a legal code.
D) The law is interpreted on the basis of tradition, precedent and usage.
Answer: C
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
66) Which of the following, if true, demonstrates that Kirawi has an unstable business environment?
A) Its business laws are inflexible and cannot be intrepreted according to the comfort of government officials.
B) Its government does not enforce product liability laws or protect individual property rights.
C) Its activities are bound by several multilateral agreements conducted with neighboring countries.
D) Its private sector comprises independently owned firms that exist to make profits.
Answer: B
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Hard
LO: 3.3: Summarize the main elements of each type of legal system.
67) Civil law can be more adversarial than common law because civil law relies more on the need to interpret laws according to tradition, precedent, and usage.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
68) Islamic law is the most widely practiced theocratic legal system today.
Answer: TRUE
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
69) Describe the importance of a nation's legal system, and identify the main differences between the three main types of legal systems.
Answer: A country's legal system is its set of laws and regulations, including the processes by which its laws are enacted and enforced and the ways in which its courts hold parties accountable for their actions. Many cultural factors–including ideas on social mobility, religion, and individualism influence a nation's legal system. Likewise, many laws and regulations are enacted to safeguard cultural values and beliefs.
Key characteristics of each type of legal system in use around the world (common law, civil law, and theocratic law), include:
1. Common law: A common law legal system reflects three elements:
Tradition. A country's legal history
Precedent. Past cases that have come before the courts
Usage. How laws are applied in specific situations
Under common law, the justice system decides cases by interpreting the law on the basis of tradition, precedent, and usage. Yet each law may be interpreted somewhat differently in each case to which it is applied. In turn, each new interpretation sets a precedent that may be followed in later cases. As new precedents arise, laws are altered to clarify vague wording or to accommodate situations not previously considered.
2. A civil law system is based on a detailed set of written rules and statutes that constitute a legal code. Civil law can be less adversarial than common law because there tends to be less need to interpret what a particular law states. Because all laws are codified and concise, parties to contracts tend to be more concerned only with the explicit wording of the code. All obligations, responsibilities, and privileges follow directly from the relevant code. Less time and money are typically spent, therefore, on legal matters.
3. Theocratic law: A legal tradition based on religious teachings is called theocratic law. Three prominent theocratic legal systems are Islamic, Hindu, and Jewish law. Islamic law is the most widely practiced theocratic legal system today. Islamic law was initially a code governing moral and ethical behavior and was later extended to commercial transactions. It restricts the types of investments companies can make and sets guidelines for business transactions.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
70) Explain each of the following terms, giving examples of each: patent, trademark, and copyright.
Answer: A patent is a right granted to the inventor of a product or process that excludes others from making, using, or selling the invention. Patents can be sought for any invention that is new, useful, and not obvious to any individual of ordinary skill in the relevant technical field. Patents motivate companies to pursue inventions and make them available to consumers because they protect investments companies make in research and development.
Trademarks are words or symbols that distinguish a product and its manufacturer. The Nike "swoosh" is a trademark, as is the name "Lexus." Trademark law creates incentives for manufacturers to invest in developing new products. It also benefits consumers because they know what to expect when they buy a particular brand. In other words, you would not expect a canned soft drink labeled "Coca-Cola" to taste like one labeled "Sprite."
Copyrights give creators of original works the freedom to publish or dispose of them as they choose. A copyright is typically denoted by the well-known symbol ©, a date, and the copyright holder's name. A copyright holder has the legal rights to:
Reproduce the copyrighted work
Derive new works from the copyrighted work
Sell or distribute copies of the copyrighted work
Perform the copyrighted work
Display the copyrighted work publicly
Copyright holders include artists, photographers, painters, literary authors, publishers, musical composers, and software developers. Works created after January 1, 1978, are automatically copyrighted for the creator's lifetime plus 50 years. Publishing houses receive copyrights for either 75 years from the date of publication or 100 years after creation, whichever comes first.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.3: Summarize the main elements of each type of legal system.
71) Explain the purpose of antitrust laws. How would the Friedman philosophy of corporate social responsibility most likely support a decision by a company to expand internationally into a country with weak antitrust laws? Include a description of the Friedman philosophy in your answer.
Answer: Laws designed to prevent companies from fixing prices, sharing markets, and gaining unfair monopoly advantages are called antitrust (antimonopoly) laws. These laws try to provide consumers with a wide variety of products at fair prices. The United States and European Union are the world's strictest antitrust regulators. Companies based in strict antitrust countries often argue that they are at a disadvantage against competitors whose home countries condone market sharing, whereby competitors agree to serve only designated segments of a certain market. That is why firms in strict antitrust countries often lobby for exemptions in certain international transactions. Small businesses also argue that they could better compete against large international companies if they could join forces without fear of violating antitrust laws.
In the absence of a global antitrust enforcement agency, international companies must concern themselves with the antitrust laws of each nation where they do business. The Friedman philosophy of corporate responsibility - named for its main supporter, the late economist Milton Friedman - says that a company's sole responsibility is to maximize profits for its owners (or shareholders) while operating within the law. If a company moved operations from a country having strict antitrust laws to a country having no such laws, managers subscribing to the Friedman philosophy would most likely applaud this decision. They would most likely argue that the company is doing its duty to increase profits for owners and, moreover, is operating within the law in the foreign country. Many people disagree with this argument against socially responsible activities.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Moderate
LO: 3.3: Summarize the main elements of each type of legal system.
72) Which of the following is an important factor in forming successful business ventures in China?
A) following the strategies of western countries for establishing business relationships
B) focusing on establishing tight formal contracts
C) giving high importance to written contracts
D) establishing a trusting relationship before proceeding with business
Answer: D
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Moderate
LO: 3.4: Outline the global legal issues facing international firms.
73) ________ refers to the takeover of an entire industry by the government.
A) Decentralization
B) Globalization
C) Nationalization
D) Automatization
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
74) A ________ is a right granted to the inventor of a product or process that excludes others from making, using, or selling the invention.
A) patent
B) trademark
C) watertight
D) copyright
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
75) ________ are words or symbols that distinguish a product and its manufacturer from competitors.
A) Patents
B) Trademarks
C) Watermarks
D) Copyrights
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
76) Shimmer and Sparkle is an American jewelry store which discovers that several shops in developing countries are selling counterfeited necklaces under their name and label. Which of the following problems are they facing?
A) patent expiration
B) trademark infringement
C) copyright expiration
D) monopolization
Answer: B
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
77) Which of the following is an example of a trademark infringement?
A) manufacturers who sell different versions of their own products in different countries
B) manufacturers who sell counterfeit products under the names and logos of more famous brands
C) a company which exports factory rejects to developing countries
D) a company which sells products at half the price of their competitors
Answer: B
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Moderate
LO: 3.4: Outline the global legal issues facing international firms.
78) Which of the following functions does a copyright perform?
A) It protects the trade secrets of an organization, including its business plans.
B) It prevents a company from monopolizing an invention.
C) It distinguishes the product and manufacturers from competitors through distinct words and symbols.
D) It gives creators of original work the freedom to publish or dispose of them as they choose.
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
79) Product liability laws are those which ________.
A) provide consumers with a wide variety of products at fair prices
B) add value to a product throughout its production and distribution
C) protect people from defective products
D) define the taxation on locally manufactured products
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
80) On a recent trip to Hong Kong, a group of tourists found several Prada bags being sold on the pavement. They cost only a few dollars and were clearly fake; though they bore the Prada trademark. This is an example of ________.
A) piracy
B) monopolization
C) ethnocentrism
D) nationalization
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Moderate
LO: 3.4: Outline the global legal issues facing international firms.
Scenario: Susan Goes Global with Grape Fizz
Susan is the CEO of Grape Fizz, a global drinks-manufacturing company. She wishes to set up production facilities in other countries and has been advised to assess the political system of each country before she does so.
81) Susan finally settles upon Valmira because it has a stable business environment. Which of the following factors, if true, proves her decision to be a good one?
A) Valmira does not enforce any product liability laws.
B) Valmira's legal system protects individual property rights satisfactorily.
C) The business laws of Valmira are flexible and can be interpreted according to the comfort of government officials.
D) The government of Valmira does not allow the private sector to flourish.
Answer: B
AACSB: Application of knowledge; Reflective thinking
Skill: Critical Thinking
Difficulty: Hard
LO: 3.4: Outline the global legal issues facing international firms.
Scenario: Stephanie Wong
Stephanie Wong, a Chinese-American, owns a consultancy that advises clients on strategies for business expansions into China. Wong is to lead a symposium for small and mid-sized exporters who are planning on expanding their businesses in China. Therefore, she is preparing answers in advance for questions that symposium participants would most likely ask.
82) Stephanie also expects participants to ask: "Are the Chinese as formal and business-oriented as Americans are?" Which of the following would most likely be Stephanie's response?
A) The Chinese operate very much like Americans, for them business is more important than pleasure.
B) The Chinese dislike guessing games; give them your sales pitch right away and let the meeting develop.
C) Don't overlook the importance of personal relationships; friendship comes before business.
D) The Chinese are very flexible and will easily adapt to your culture's way of doing business.
Answer: C
AACSB: Reflective thinking
Skill: Critical Thinking
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
83) Another question that Stephanie anticipates concerns the acceptability of certain topics of discussion like: "Should we avoid discussing our families and spouses?" Which of the following represents the most effective response to this question?
A) Absolutely, family is kept completely separate from business in China.
B) Yes, because it is considered very rude by businesspeople to discuss family.
C) No, Chinese businesspeople may invite business partners to family functions.
D) It's fine to discuss family, but never agree to go to a business partner's house.
Answer: C
AACSB: Reflective thinking
Skill: Critical Thinking
Difficulty: Moderate
LO: 3.4: Outline the global legal issues facing international firms.
84) Trademark protection typically lasts indefinitely, provided the word or symbol continues to be distinctive.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
85) Product liability laws hold only manufacturers responsible for damage, injury, or death caused by defective products.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
86) Developing nations have the toughest product liability laws, while developed countries have more relaxed laws.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.4: Outline the global legal issues facing international firms.
87) ________ is the layer of corporate social responsibility whereby a corporation donates money and, perhaps, employee time toward a specific social cause.
A) Risk management
B) Strategic CSR
C) Socialist CSR
D) Traditional philanthropy
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
88) ________ is the layer of corporate social responsibility whereby a company develops a code of conduct that it will follow in its global operations and agrees to operate with greater transparency.
A) Strategic CSR
B) Risk management
C) Traditional philanthropy
D) Task orientation
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
89) ________ is the layer of corporate social responsibility in which a business builds social responsibility into its core operations to create value and build competitive advantage.
A) Risk management
B) Traditional philanthropy
C) Strategic CSR
D) Political polity
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
90) Horizon Ltd. is a software company that, over the last year, incorporated social responsibility into its core operations to create value and build competitive advantage. Which layer of corporate social responsibility does Horizon Ltd. function at?
A) risk management
B) traditional philanthropy
C) strategic CSR
D) political CSR
Answer: C
AACSB: Analytical thinking; Application of knowledge
Skill: Application
Difficulty: Moderate
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
91) Which of the following philosophies maintains that a company's sole responsibility is to maximize profits for its owners?
A) utilitarian view
B) righteous moralist view
C) Friedman view
D) cultural relativist view
Answer: C
AACSB: Application of knowledge; Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
92) The ________ view states that a company should adopt local ethics wherever it operates because all belief systems are determined within a cultural context.
A) Friedman
B) cultural relativist
C) righteous moralist
D) utilitarian
Answer: B
AACSB: Application of knowledge; Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
93) The ________ view says that a company should maintain its home-country ethics wherever it operates because the home-country's view of ethics and responsibility is superior to others' views.
A) Friedman
B) righteous moralist
C) cultural relativist
D) utilitarian
Answer: B
AACSB: Application of knowledge; Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
94) Which of the following philosophies maintains that a company should maximize "good" outcomes and minimize "bad" outcomes wherever it operates?
A) Friedman view
B) righteous moralist view
C) cultural relativist view
D) utilitarian view
Answer: D
AACSB: Application of knowledge; Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
95) ________ is the environmental impact of greenhouse gases (measured in units of carbon dioxide) that results from human activity.
A) Carbon footprint
B) Greenhouse log
C) Carbon cycle
D) Greenhouse check
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
96) ________ measures the indirect carbon dioxide emissions from the whole life cycle of products–from their manufacture to eventual breakdown.
A) Primary footprint
B) Secondary footprint
C) Tertiary footprint
D) Internalized footprint
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
97) Which of the following does the secondary footprint measure?
A) the burning of fossil fuels
B) direct energy consumption
C) indirect carbon dioxide emissions
D) emissions caused by natural forces
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
98) The cultural relativist view says that a company's sole responsibility is to maximize profits for its owners while operating within the law.
Answer: FALSE
AACSB: Application of knowledge; Ethical understanding and reasoning
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
99) Corporate social responsibility is the practice of going beyond legal obligations to actively balance commitments to investors, customers, other companies, and communities.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
100) Describe four corporate responsibility issues and explain how these issues can impact a company's international relations.
Answer: Conscientious business leaders realize that the future of their companies rests on healthy workforces and environments worldwide. The following are four issues of corporate responsibility.
1. BRIBERY AND CORRUPTION Similar to other cultural and political elements, the prevalence of corruption varies from nation to nation. In certain countries, bribes are routinely paid to distributors and retailers to push a firm's products through distribution channels. Bribes can mean the difference between obtaining an important contract and being completely shut out of a market. But corruption is detrimental to society and business. Among other things, corruption can send resources toward inefficient uses, hurt economic development, distort public policy, and damage national integrity.
2. LABOR CONDITIONS AND HUMAN RIGHTS To fulfill their responsibilities to society, companies are monitoring the actions of their own employees and the employees of companies with whom they conduct business. Pressure from human rights activists drove conscientious apparel companies to introduce codes of conduct and monitoring mechanisms for their international suppliers.
3. FAIR TRADE PRACTICES Fair trade products are those that involve companies working with suppliers in more equitable, meaningful, and sustainable ways. TransFair USA is the nonprofit organization that independently certifies fair trade products. The Fair Trade model of international trade benefits more than 1 million farmers and farm laborers in 58 developing countries across Africa, Asia, and Latin America. Fair Trade products now include coffee, tea, herbs, cocoa, chocolate, fruit, rice, sugar, flowers, honey, and spices. TransFair USA certifies that a product meets criteria in the following categories: Fair Prices, Fair Labor Conditions, Direct Trade, Democratic Community Development, and Environmental Sustainability.
4. ENVIRONMENT Concern for the environment and ecosystem is no longer left to government agencies and nongovernmental organizations. Today companies pursue "green" initiatives to reduce their toll on the environment and to reduce operating costs and boost profit margins.
These types of corporate responsibility issues have an impact on international relations because they affect political relations. The political relations between a company's home country and the nations in which it does business affect its international business activities. Favorable political relationships foster stable business environments and increase international cooperation in many areas, including the development of international communications and distribution infrastructures. In turn, a stable environment requires a strong legal system through which disputes can be resolved quickly and fairly. In general, favorable political relations lead to increased business opportunities and lower risk.
AACSB: Application of knowledge; Reflective thinking
Skill: Synthesis
Difficulty: Moderate
LO: 3.5: Explain the main philosophies of ethics and social responsibility.
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