Deck 7: The Political and Legal Environment

Question 1

___________ involves impediments to the transfer of production factors.

A) Ownership risk
B) Transfer risk
C) Operational risk
D) Bargaining risk

Answer 1

B

Question 2

Good citizenship by an MNE improves

A) competitor relationships
B) tax laws
C) bargaining power
D) none of the above

Answer 2

C

Question 3

An MNE strives to do which of the following

A) remove limits on foreign ownership.
B) reduce mandatory requirements for product or service adaptation.
C) obtain legitimacy and acceptance.
D) all of the above.

Answer 3

D

Question 4

The political environment in both the home and host countries influences _________ trade and investments in multiple ways.

A) international
B) world
C) common
D) MNE

Question 5

Most patent systems outside __________ operate on first to file rather then the first to invent principle.

A) China
B) USA
C) Africa
D) Cuba

Question 6

A multilateral treaty that is ratified by many countries with a joint interest in the issue at hand is called a(n) ___________ treaty.

A) international
B) law-making
C) labor
D) enforced

Question 7

The US has recently undertaken a major effort to adopt a ___________approach to antitrust regulation and enforcement.

A) firm
B) global
C) national
D) strategic

Question 8

What are the strategies for managing political risk?

A) reduce exposure by utilizing host country financing
B) accelerate profit repartition
C) develop a staggered technology transfer policy
D) all of the above

Question 9

The various ways to measure the risk can be roughly classified into five categories. Which of the following is not part of the five categories?

A) Scenario Approach
B) Qualitative Approach
C) Risk Approach
D) None of the above

Question 10

The two international treaties that govern patent protection are

A) Paris Convention and Patent Cooperation Treaty.
B) International Patent Patrol and Patent Treaty.
C) Patent Protection Treaty and International Patent Patrol.
D) Patent Protection Treaty and Patent Cooperation Treaty.

Question 11

A multi-lateral treaty that is ratified by many countries with a joint interest in the issue at hand is called a(n)

A) executive agreement.
B) treaty.
C) law-making treaty.
D) law-formation treaty.

Question 12

One of the legal issues that MNEs are particularly concerned with is

A) protection of corporate and individual property.
B) civil and criminal law.
C) foreign trade policies.
D) protection of community property.

Question 13

Which is NOT an international arbitration authority?

A) International Court of Arbitration
B) Inter-American Commercial Arbitration Commission
C) Canadian-American Commercial Arbitration Commission
D) International Commercial Arbitration Commission

Question 14

A legal institution associated with an independent judiciary relying on case precedents is called

A) common law system.
B) civil law system.
C) theocratic law system.
D) none of the above

Question 15

Which is NOT a type of political risk?

A) ownership risk
B) operational risk
C) transfer risk
D) opportunistic risk

Question 16

Which is NOT a classification of measuring risk?

A) qualitative approaches
B) scenario approaches
C) decision-tree methods
D) none of the above

Question 17

The inherent problem with measuring political risk is because

A) things are continuously changing.
B) too many things remain stable.
C) some things change while others remain stable.
D) a sufficient equation has not yet been developed.

Question 18

Change in political risk may come as the result of

A) a decision of an autocratic ruler.
B) a political misstep.
C) shifting power and personal power balance.
D) all of the above.

Question 19

Which of the following is NOT considered a type of political risk?

A) public perspective
B) operational
C) transfer
D) ownership

Question 20

__________ includes any change to the "rules of the game" under which the foreign firm operates, especially when foreign firms are singled out.

A) Ownership risk
B) Bargaining risk
C) Operational risk
D) Transfer risk

Question 21

The importance of political risk creates demand for its assessment. The various ways to measure the risk can be roughly classified into which of the following categories

A) Qualitative Approaches and Aggregates Of Expert Opinions
B) Scenario Approaches and Decision-Tree Methods
C) Quantitative Techniques That Result In Political Risk Indices
D) All of the above

Question 22

______________ represents a threat to the current ownership structure or to the ability of the MNE to select or shift to a given governance structure.

A) Ownership risk
B) Bargaining risk
C) Operational risk
D) None of the above

Question 23

Which of the following statements is true?

A) The bargaining power of the MNE tends to be greater when it offers a differentiated, technologically advanced product that others cannot or are unwilling to provide but that is vital to the host economy (for instance, it constitutes a nation's major source of foreign currency)
B) The bargaining power of the MNE tends to be smaller when it offers a differentiated, technologically advanced product that others cannot or are unwilling to provide but that is vital to the host economy (for instance, it constitutes a nation's major source of foreign currency)
C) The bargaining power of the MNE tends to be greater when it offers a similar, technologically advanced product that others cannot or are unwilling to provide but that is vital to the host economy (for instance, it constitutes a nation's major source of foreign currency)
D) None of the above

Question 24

___________ is the acceptance of the MNE as a natural organ in the local environment.

A) Affinity
B) Legitimacy
C) Animosity
D) Geopolitics

Question 25

What are the models that have been used to describe the government-MNE relationship?

A) sovereignty at bay
B) dependency
C) neo-mercantilism
D) all of the above

Question 26

________________ between nations reflects how closely aligned, or estranged, nations are based on history and political reality, which is an important determinant of international business relations.

A) Affinity
B) Animosity
C) Geopolitics
D) both A and B

Question 27

In ________________ and many other developing nations, enforcement of laws is often lax and halfhearted.

A) the United States
B) Germany
C) Sweden
D) China

Question 28

The United States and other former British colonies such as Australia and New Zealand, rely on a __________________ system.

A) civil law
B) common law
C) theocratic law
D) democratic law

Question 29

A conference of mayors from France, Germany, and the US convened in Lyons, France, in April 2000, to discuss_____________________.

A) environmental regulations
B) tariffs
C) opportunities stemming from globalization
D) the need for international regulations

Question 30

In___________, provincial governments play a substantial role in trade and investment regulation.

A) China
B) Norway
C) Indonesia
D) Canada

Question 31

U.S. based airliners are fueling much of their growth by

A) acquiring utilities in global hot spots.
B) downsizing global market attempts.
C) outsourcing global relations.
D) moving its operations to Poland.

Question 32

An example of _____________ is when India changed laws in the 1970s and caused several foreign MNEs to leave.

A) ownership risk
B) transfer risk
C) title risk
D) none of the above

Question 33

Many foreign countries accept ________________ certification of products safety as a substitute for going through their own national laboratories.

A) Cuba
B) Africa
C) China
D) USA

Question 34

In the late 1970s and 1980s, the U.S. car manufactures sought to limit what import to the United States?

A) Cuban
B) Asian
C) Japanese
D) Chinese

Question 35

US firms are not allowed to invest in which country?

A) China
B) Cuba
C) Asia
D) Africa

Question 36

Which type of political regime is considered to be more stable?

A) communistic
B) democratic
C) dictatorship
D) imperialistic

Question 37

In November 2012, Boeing announced the largest order ever in its history (230 planes, worth $20.1 billion at list prices), from Lion Air of Indonesia, on the occasion of _____________visit to the country.

A) Jimmy Carter's
B) John Grisham's
C) A U.S. Delegation's
D) President Obama's

Question 38

Three international treaties govern patent protection.

Question 39

Regional bodies take responsibility for the enactment and enforcement of laws.

Question 40

Legal jurisdiction is often easy to determine in international business.

Question 41

Operational risks include any change to the "rule of the game" under which the foreign firm operates.

Question 42

Competition for FDI in keen, host government efforts are directed at technology transfers and imports.

Question 43

Political behavior is development and use of power in relation to other entities.

Question 44

Despite globalization, the MNE remains firmly grounded in its host environment.

Question 45

Investment incentives are more likely to be offered when competition among potential sites is intense.

Question 46

There is never any special support offered to MNEs willing to invest in troubled areas.

Question 47

Concerning the topic of FDI, an investment agency's main roles are to solicit potential investors, weigh project feasibility, and to determine, provide, and administer incentives.

Question 48

The bargaining power of the MNE tends to be less when it offers a differentiated, high-tech product.

Question 49

When a nation offers an attractive environment that is unmatched by others, its bargaining power is low.

Question 50

Local government objectives of the MNE are protecting national interests, protecting their environment, and protecting the company's interests.

Question 51

The key political goal of the MNE in the host country is to obtain legitimacy and acceptance.

Question 52

The most important political challenge of the MNE is the relationship with governments in the host and home countries.

Question 53

Jurisdictional issues are much more complex in the context of international business then in domestic business.

Question 54

Political activities in the United States include constituency building, political action committee contribution, advertising, lobbying and coalition building.

Question 55

Political risk is

A) the probability local politics will shut down the MNE.
B) the probability of disruption to MNE's operations.
C) the probability the MNE will take over local politics.
D) the probability politics will interfere with lives of citizens.

Question 56

Competition reflects bargaining or control and related conflicts with the government and the MNE, each seeking private gains at the expense of the other's interests.

Question 57

Affinity or animosity between nations reflects how far aligned, or estranged, nations are based on history and political reality, which is an important determinant of international business relations.

Question 58

Political processes are viewed by economists as constraints on the block of flow in production factors, intermediary and final goods, that distort supply and demand.

Question 59

Political behavior is defined as "the acquisition, development, securing, and use of power in relation to other entities, where power is viewed as the capacity of social actors to overcome the resistance of other actors."

Question 60

In the early 1970s, the Indian government established ownership rules that led to the exodus of many foreign MNEs.

Question 61

The lesser the governmental freedom, the lower the probability of terrorism developing in the country.

Question 62

China ranked moderately on political risk despite the regime's human rights record.

Question 63

In the aftermath of September 11, the United States expressed willingness to abolish tariffs on the importation of cotton yarn from Pakistan and ease restrictions on bed linen from that country.

Question 64

In developed nations, the ratio of government expenditure as a percentage of GDP now stands at five times its World War I level.

Question 65

In order to draw Mercedes-Benz into the state, Alabama offered the carmaker exemption from taxation.

Question 66

When investment opportunities emerged in Eastern and Central Europe, the Chinese government relaxed its investment requirements in order to remain an attractive investment target.

Question 67

Prior to the opening of the Chinese Mainland, Hong Kong benefited from its position as gateway to China.

Question 68

Trade and investment among hostile countries, such as the United States and Cuba, is often prohibited.

Question 69

Syrian citizens are prohibited from doing business in Asia.

Question 70

Political-environment acts, such as governmental incentives and preferential subsidies, influence a company's strategic decisions.

Question 71

Three models used to analyze government-MNE relationships are Sovereignty at Bay, Dependency, and Neo-Mercantilism.