California State University, Fresno

BA 104

International Business: The Challenges of Globalization, 7e (Wild)

Chapter 4 Economics and Emerging Markets

1)China relies on its cheap labor for economic development and India on the brainpower of its people.

2. Incentives and rewards for individual business initiatives are an important aspect of collectivist cultures.

3. Individualist cultures tend to offer fewer incentives and rewards than collectivist cultures.

4. Entrepreneurs are businesspeople who accept the risks and opportunities involved in operating new business ventures.

5. No nation has a completely individualist or completely collectivist cultural orientation.

6. Central planning is rooted in the ideology that the welfare of a group is more important than individual well-being.

7. Frederick Taylor popularized the idea of central economic planning in the nineteenth century.

8. The ultimate goal of a market economy is to ensure that the government takes complete control over the distribution of a nation's resources.

9. The government makes nearly all economy-related decisions in a market economy.

10. One of the reasons for the decline of central planning was its failure to create economic value for customers.

11. Central planning led to little economic growth and consistently low standards of living.

12. A centrally planned economy gives individuals access to alternative purchase options.

13. An economic system based on public ownership fosters growth much better than an economy based on private ownership.

14. The Chinese term "guanxi" means government ownership.

15. In a mixed economy, the government tends to control the economic sectors that are important for national security.

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16. When the assets of a country are owned by the government, there seems to be more incentive to eliminate waste.

17. As supply and demand change for a good or service, so does its selling price.

18. Interfering with the price mechanism is a violation of a fundamental principle of the market economy.

19. Both GDP and GNP measure a nation's income per person.

20. Volunteer work and unpaid household work are included in GNP.

21. Barter is an alternative for buyers who lack money needed to pay for imports.

22. The concept of purchasing power parity (PPP) must be applied to understand the true value of a currency in its home country.

23. The human development index (HDI) demonstrates that high national income alone

guarantees human progress.

24. Nations with the poorest infrastructures and lowest personal incomes are called developing countries.

25. One of the key obstacles faced by countries in economic transition is the lack of managerial expertise.

26. Businesspeople who accept the risks and opportunities involved in creating and operating new business ventures are called                                                     .
    1. managers
    2. supervisors
    3. entrepreneurs
    4. angel investors

27. In                       cultures, economic systems tend to provide incentives and rewards for a person's private business initiatives.
    1. individualist
    2. high uncertainty avoidance
    3. feminine
    4. large power distance

28. The                       system of a country consists of the structure and processes it uses to allocate its resources and to conduct its commercial activities.
    1. political
    2. economic
    3. social
    4. cultural

29. A                        economy is a system in which the government owns a nation's land, factories, and other economic resources, and schedules nearly all economic activities.
    1. mixed
    2. market
    3. centrally planned
    4. laissez-faire

30. Central planning is rooted in the ideology that                             .
    1. the welfare of a group is more important than individual well-being
    2. individual concerns should be placed above group consensus
    3. individual and group concerns are just as important as government concerns
    4. privatization will enhance a country's economic well-being

31. Which of the following statements is true of a centrally planned economy?
    1. Individual concerns are as important as the government's concerns.
    2. Consumers determine the prices of products and labor.
    3. Factories are privately owned.
    4. The government sets the production goals.

32. In most centrally planned economies that failed,                            .
    1. market conditions had determined who would produce goods
    2. prices of products were seen as a function of supply and demand
    3. central planning agencies had specified the production goals
    4. central planners had paid attention to efficiency improvement

33. Who among the following popularized the idea of central economic planning in the nineteenth century?
    1. Frederick Taylor
    2. Karl Marx
    3. Peter Drucker
    4. Henry Fayol  

34. North Korea practices a policy of self-reliance known as                                .
    1. guanxi
    2. laissez-faire
    3. juche
    4. kaizen  

35. Which of the following disagrees with the concept of centrally planned economies?
    1. At the time of their collapse, standards of living in most centrally planned economies were at or above those of market economies.
    2. Basic necessities were often not provided to citizens in centrally planned economies.
    3. Underground economies for goods and services thrived in most centrally planned economies.
    4. Prices on the black market were much higher than the official prices set by governments.

36. Which of the following emerged during the failure of centrally planned economic systems?
    1. black markets

1. 2. public markets
   3. free enterprise system
   4. market economies

37. Which of the following is an important factor in forming successful business ventures in China?
    1. following the strategies of western countries for establishing business relationships
    2. focusing on establishing tight formal contracts
    3. giving high importance to written contracts
    4. establishing a trusting relationship before proceeding with business

38. Guanxi, in the Chinese business context, means                           .
    1. bribing government officials
    2. manufacturing inexpensive products
    3. personal relationships
    4. preference for communism

39. In which of the following systems is land, factories, and other economic resources equally split between private and government ownership?
    1. market economy
    2. black market economy
    3. mixed economy
    4. centrally planned economy

40. 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?

1. 1. Businesses in most economic sectors of the country are privately owned.
   2. The government considers banking sector as important to national security.
   3. The country has never experienced threats against its long-term stability.
   4. The government views banking as more important than manufacturing.

41. France, Germany, and Sweden are examples of                           .
    1. centrally planned economies
    2. market economies
    3. closed economies
    4. mixed economies

42. In which of the following economies would manufacturing firms most likely produce defective products due to low incentives for quality outputs?
    1. centrally planned economies
    2. market economies
    3. closed economies
    4. mixed economies

43. The selling of government-owned economic resources to private operators is called

                     .

1. 1. price mechanism
   2. social stratification
   3. privatization
   4. guanxi  

44. Which of the following is the main goal of privatization?
    1. to ensure that the government specifies production goals

1. 2. to increase economic efficiency
   3. to increase subsidies to companies
   4. to increase government's control on the market

45. In a market economy, economy-related decisions are determined by the interactions between

                     .

1. 1. the government and individuals
   2. supply and demand
   3. customers and employees
   4. large and small businesses

46. Which of the following dictates supply and demand in a market economy?
    1. privatization
    2. production quotas
    3. price mechanism
    4. government intervention

47. A market economy is rooted in the belief that                           .
    1. all the economic resources should be owned by the government
    2. individual concerns should be placed above group concerns
    3. every individual's business goals must be set by the government
    4. government concerns matter the most in a country's economy

48. Assuming insects destroyed most of the coffee crops in key coffee-producing countries worldwide, which of the following would most likely occur within the coffee market?
    1. Coffee prices would increase.

1. 2. Coffee prices would decrease.
   3. Demand for coffee would increase.
   4. Demand for coffee would decrease.

49. Which of the following countries has a contemporary market economy?
    1. France
    2. Sweden
    3. India
    4. United States  

50. Several research studies were published lately that documented the health benefits of a certain grain. Which of the following is the most likely economic result of these findings?
    1. Demand for the grain increases.
    2. Equilibrium in terms of demand and supply is maintained.
    3. The price of the grain decreases.
    4. Supply of the grain remains constant.

51. Laissez-faire economics refers to                           .
    1. less government interference in commerce and greater individual economic freedom
    2. a government-controlled system with less economic freedom at the individual level
    3. a centrally planned economic system
    4. creating monopolies through government partnership

52. To function smoothly and properly, a market economy requires                              .
    1. government partnership
    2. the practice of monopoly

1. 3. price flexibility
   4. nationalization

53. Supply and demand are dictated by                          .
    1. government ownership
    2. free enterprise
    3. the price mechanism
    4. the management's decisions

54. In a market economy, access to alternative purchase options is known as                              .
    1. price-sensitivity
    2. economic transition
    3. laissez-faire
    4. free choice

55. Which of the following statements is most accurate regarding the element of free choice when market economies are compared with centrally planned economies?
    1. Consumers have free choice in both types of economies.
    2. Free choice exists in market economies, but choices are restricted in planned economies.
    3. Planned economies allow for greater free choice than do market economies.
    4. Consumers do not have free choice in either of these economies.

56. When one company alone controls a product's supply and therefore, its price, it is considered a(n)                .
    1. oligopsony
    2. monopoly

1. 3. duopoly
   4. oligopoly  

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57. Which of the following control inflation through policies regarding taxation and government spending in a market economy?
    1. fiscal policies
    2. monetary policies
    3. social policies
    4. trade policies

58.                       policies control the currency supply and interest rates in a market economy.
    1. Fiscal
    2. Economic
    3. Monetary
    4. Social

59. Which of the following would characterize a nation with high degree of economic freedom?
    1. low tariffs
    2. strict trade policies
    3. government interventions
    4. flourishing black markets

60. The                       approach to national economics calls for less government interference in commerce and greater individual economic freedom.
    1. totalitarian
    2. laissez-faire

1. 3. guanxi
   4. centrally planned economy

61. Which of the following would most likely characterize a nation with a low degree of economic freedom?
    1. low government intervention
    2. protected property rights
    3. strict trade policies
    4. low tariffs

62. Which of the following terms refers to the broadest measure of economic development of a country?
    1. gross domestic product (GDP)
    2. purchasing power parity (PPP)
    3. gross national product (GNP)
    4. human development index (HDI)

63.                       is the value of all goods and services produced by the domestic economy over a one-year period.
    1. Gross domestic product (GDP)
    2. Human development index (HDI)
    3. Gross national product (GNP)
    4. Purchasing power parity (PPP)

64. The                       of a country is its gross national product divided by its population.

1. 1. GNP per capita
   2. GDP per capita
   3. purchasing power parity
   4. purchasing power

65. The relative ability of two countries' currencies to buy the same basket of goods in those two countries is called                                                 .
    1. gross national product
    2. gross domestic product
    3. purchasing power
    4. purchasing power parity

66.                       is the value of goods and services that can be purchased with one unit of a country's currency.
    1. Potential output
    2. Gross national product
    3. Purchasing power
    4. Gross domestic product

67. An investor wants to invest in a country that has a high gross national income (GNI). Which of the following countries would most likely qualify as a prospect?
    1. Nepal
    2. India
    3. Japan
    4. Vietnam

68. Which of the following terms is used to refer to the exchange of goods and services for other goods and services instead of money?
    1. fiat money
    2. letter of credit
    3. barter
    4. guanxi  

69. The GDP per capita of a country is lower than that of France. If the GDP per capita of the country is adjusted for PPP, the country's revised GDP is higher than that of France. Which of the following is most likely true about the country?
    1. The cost of living in the country is higher than that of France.
    2. The cost of living in the country is lower than that of France.
    3. The cost of living in the country is approximately equal to that of France.
    4. The cost of living in the country has increased over the past decade.

70. The GDP per capita of a country is higher than that of Thailand. If the GDP per capita of the country is adjusted for PPP, the country's revised GDP is lower than that of Thailand. Which of the following is most likely true about the country?
    1. There are fewer goods available for purchase in the country than in Thailand.
    2. The cost to buy everyday goods in the country is approximately the same as in Thailand.
    3. It costs less to buy everyday goods in the country than in Thailand.
    4. It costs more to buy everyday goods in the country than in Thailand.

71. Which of the following measures the extent to which a government equitably provides its people with a long and healthy life, an education, and a decent standard of living?
    1. category development index
    2. gross national product index
    3. human development index
    4. purchasing power index

72. A company is conducting a research on new markets by comparing countries in terms of their human development index (HDI) scores. The company wishes to expand into a market where individuals experience a very high level of total well-being. Which of the following countries would the company most likely choose?
    1. Russia
    2. Mexico
    3. China
    4. Japan

73. Which of the following is true about economic development of a nation?
    1. The purchasing power parity is a poor indicator of a people's total well-being.
    2. GDP is a larger figure and includes a nation's income generated from exports, imports, and international operations.
    3. Illegal activities such as gambling and black market transactions are considered in GDP and GNP.
    4. Using gross product figures to compare production across countries accounts for different cost of living in each country.

74. Which of the following statements is true of national production?
    1. Marketers use GDP or GNP figures to determine whether a country's population is wealthy enough to purchase its products.
    2. Per capita numbers provide a detailed picture of development of the entire country.
    3. Gross product figures accurately indicate whether a nation's economy is growing or shrinking.
    4. Volunteer work and unpaid household work are considered in GDP and GNP.

75. Nations having the poorest infrastructures and lowest personal incomes are called                              .
    1. developed countries
    2. newly industrialized countries
    3. emerging markets
    4. developing countries

76. A country that has recently increased the portion of its national production and exports derived from industrial operations is called a(n)                                                        .
    1. newly industrialized country (NIC)
    2. developing country
    3. emerging market
    4. developed country

77.                       is the process by which a nation changes its fundamental economic organization and creates new free-market institutions.
    1. Central planning
    2. Economic transition
    3. Industrialization
    4. Economic liberalism

78. Which of the following is a major obstacle to economic transition?
    1. lack of government support
    2. environmental degradation
    3. privatization
    4. black markets

79. Economic transition is the process of moving from                              .
    1. developed to developing economies
    2. centrally planned to free-market economies
    3. developed to emerging economies
    4. free-market to centrally planned economies

80. 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?
    1. Contracts are critical because of their extreme importance in Chinese business.
    2. Face-to-face communications and personal relationships take priority over written contracts.
    3. Non-Chinese businesspeople should take time to agree on a legal contract before developing personal relationships.
    4. Business relationships are established only after successful legal dealings are concluded.

81. 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?
    1. The Chinese operate very much like Americans, for them business is more important than pleasure.
    2. The Chinese dislike guessing games; give them your sales pitch right away and let the meeting develop.
    3. Don't overlook the importance of personal relationships; friendship comes before business.
    4. The Chinese are very flexible and will easily adapt to your culture's way of doing business.

82. 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?
    1. Absolutely, family is kept completely separate from business in China.
    2. Yes, because it is considered very rude by businesspeople to discuss family.
    3. No, Chinese businesspeople may invite business partners to family functions.
    4. It's fine to discuss family, but never agree to go to a business partner's house.

83. Sergei believes that it is important to know the origin of the economic system in each country. He learns that the idea of central economic planning that was practiced in Russia, was popularized in the nineteenth century by                                                                                       .
    1. Peter Drucker
    2. Frederick Taylor
    3. Karl Marx
    4. Abraham Maslow

84. Sergei recognizes that one of the major reasons why central planning declined was its failure to     .
    1. create economic value
    2. take care of national security
    3. control rampant economic growth
    4. satisfy government requirements

85. Sergei learns that an important aspect of market-based economies is the private ownership of companies. As Russia goes through the privatization process, it aims to                                                               .
    1. increase tax revenues
    2. improve military defense

1. 3. increase social welfare
   4. increase economic efficiency

86. Sergei finds out that prices in a market economy are determined by the interplay of

                     .

1. 1. government and labor
   2. labor and management
   3. demand and prices
   4. supply and demand

87. Russia is in transition from                            .
    1. a capitalist economy to a mixed economy
    2. a centrally planned economy to a free-market economy
    3. a market economy to a centrally planned economy
    4. a mixed economy to a centrally planned economy

88. Which of the following challenges is Cleanshot most likely to face in Russia?
    1. organized crime
    2. too many competitors
    3. low demand for the products of non-Russian companies
    4. fading underground economy