Deck 8: The International Legal Environment of Business

Question 1

The absolute advantage theory of international trade states that ________.

A)companies should franchise their trademarks to avoid a nation-state's restrictions on foreign direct investment
B)all licensing agreements should be subject to restrictions of the host country
C)a country would contribute to global efficiency if it produced specialized products more efficiently than others did
D)an individual nation should concentrate on exporting the goods that it can produce most efficiently

Answer 1

D

Question 2

The major goals of the legal system of a certain country are to encourage collectivization of the economy and to maintain national security. In addition, most property belongs to the state, particularly industrial and agricultural property. This country has a(n) ________ system.

A)common-law
B)Hindu-law
C)socialist-law
D)Islamic-law

Answer 2

C

Question 3

Mediterranean and Latin American cultures base their group affiliation on ________.

A)age
B)gender
C)family
D)profession

Answer 3

C

Question 4

Which of the following is true of the cultural dimensions in different countries?

A)Gender- and family-based affiliations are important in Saudi Arabia, where a strict interpretation of Islam prevents women from playing a major role in business.
B)The hourly wage is higher in the United States than it is in Germany, meaning that the workforce is able to acquire more consumer goods in Germany.
C)The Iranian government supports the selling of satellite communications in Iran, even though they present decadent Western values.
D)Spanish is the national language of Brazil, but is not widely spoken in the rest of Latin America.

Question 5

________ is generally considered to be the least risky means of doing international business.

A)Licensing
B)Trade
C)Franchising
D)Direct investment

Question 6

One of the major goals of the Soviet legal system was to ________.

A)govern relationships between individuals and corporations
B)regulate family matters and property succession
C)promote private ownership of property
D)encourage collectivization of the economy

Question 7

Which of the following statements is true about the relationship between civil-law systems and common-law systems?

A)They are polar opposites which have not yet been reconciled by legal scholars.
B)They are most evident in Islamic nations.
C)They are tending to merge, as judges in civil-law countries take greater note of case law in their decisions.
D)Hindu law makes use of common law, but it chooses to ignore cases that would be considered precedents under a civil-law system.

Question 8

The theory of ________ refers to a theory of trade relationship that encourages nations to concentrate on exporting the goods they can produce most efficiently.

A)comparative advantage
B)new trade
C)absolute advantage
D)traded intermediate goods

Question 9

________ is one of the five major families of law.

A)Capitalist law
B)Socialist law
C)Criminal law
D)Business law

Question 10

Hindu law is primarily concerned with ________.

A)maintaining national security
B)preserving the authority of the state over agricultural land
C)family matters and property succession
D)ensuring that citizens obey the Shari'a

Question 11

________ refers to contractual agreement by which a company makes its trade secrets, trademarks, patents, or copyrights available to a foreign individual or company in return either for royalties or for other compensation based on the volume of goods sold or a lump sum.

A)International licensing
B)Expropriation
C)International franchising
D)Foreign direct investment

Question 12

When they venture into foreign territory, business managers have to be guided by ________.

A)the national legal system of their own country, that of the host country, and international law
B)international law only
C)the national legal system of the host country only
D)the national legal system of their own country and that of the host country

Question 13

Which of the following statements is true of a socialist-law system?

A)It is designed to preserve the authority of the state over agricultural land.
B)It is designed to enable private ownership of all means of production.
C)It prohibits earning interest on money.
D)It tends to put great emphasis on private law.

Question 14

Companies doing business in ________ follow common law.

A)Germany
B)France
C)England
D)Sweden

Question 15

Countries that follow ________ organize their legal systems around legal codes rather than around cases, regulations, and precedents.

A)Hindu law
B)socialist law
C)common law
D)Romano-Germanic civil law

Question 16

Which of the following statements is true about Hindu law?

A)It is based on writings of the Positivist School that date from the 13th Century.
B)It is based on a belief in the collectivization of agricultural property.
C)It is linked to the revelation of the Vedas, a collection of religious songs and prayers.
D)It is essentially nonreligious and impersonal, basing its fundamental teaching on objective reasoning and logic.

Question 17

Which of the following statements is true of foreign distributors?

A)They have little involvement with buyers or sellers outside the parent country.
B)They purchase imported goods at a discount and resell them in the foreign or host country.
C)They maintain a principal-agent relationship with the exporter.
D)They do not take title to the goods being exported.

Question 18

The law that governs the relationships between nation-states is known as ________.

A)private international law
B)public international law
C)international business law
D)international trade law

Question 19

Socialist-law systems are based on ________.

A)the teachings of Karl Marx
B)the Romano-Germanic civil law
C)the rules governing personal and religious behavior set out in texts known as Sastras
D)the British common-law tradition

Question 20

Which of the following statements is true of civil-law systems?

A)They make decisions that rely heavily on case precedents.
B)They have a superior public law.
C)They tend to put great emphasis on private law.
D)They are organized around cases and regulations.

Question 21

A large automobile manufacturer wants to expand its market for mid-size cars to a country with a large population and sizeable working class. In addition, this country is also known to be a source for cheap labor. This is something that could help the auto company significantly improve its production efficiency. Which of the following methods of engaging in international business will help the company best achieve these goals?

A)international licensing
B)joint venture
C)international franchising
D)foreign subsidiary

Question 22

In order to stimulate its local textile economy and promote the production of cotton, something that has traditionally been imported, a country decides to charge the importing agency a certain percentage of the value of the item being imported. By doing this, the government seeks to make such imported products more expensive and thus unattractive. This is an example of a(n) ________.

A)export control system
B)quota
C)tariff
D)expropriation system

Question 23

Which of the following allows a government expropriating foreign-owned private property to claim that the jurisdiction of courts in the owner's country do not apply to it because it is a government rather than a private-sector entity?

A)bilateral investment treaty
B)act-of-state doctrine
C)sovereign immunity doctrine
D)joint venture

Question 24

Which of the following statements is true of the Foreign Sovereign Immunities Act (FSIA)?

A)It protects U.S. citizens doing business in foreign nations.
B)It protects foreign companies doing business in the United States.
C)It protects joint ventures from liability for toxic accidents.
D)It protects foreign governments from U.S. judicial review of their public acts.

Question 25

One of the goals of the ________ was to create a uniform external tariff to be applied to all nonmembers.

A)World Trade Organization
B)European Union
C)North American Free Trade Agreement
D)Organization for Economic Cooperation and Development

Question 26

The ________ holds that each nation is bound to respect the independence of every other sovereign state and that the courts of one nation will not sit in judgment on the acts of the courts of another nation.

A)Single European Act
B)sovereign immunity doctrine
C)act-of-state doctrine
D)Maastricht Treaty

Question 27

The ________ is in the process of forming a Western European political and economic community with a single currency and a common external tariff barrier toward nonmembers.

A)Statute of Europe
B)European Union
C)North American Free Trade Agreement
D)Association of Southeast Asian Nations

Question 28

Expropriation ________.

A)is granting permits to a licensee of a trademark to market the licensor's goods or services in a particular nation
B)is the taking of private property by a host-country government for either political or economic reasons
C)is a contractual agreement by which a company makes its trade secrets, trademarks, patents, or copyrights available to a foreign individual or company
D)is the ownership and use of private property for profit, which is in violation of socialist law

Question 29

Which of the following is true of the sovereign immunity doctrine?

A)A host government expropriates the property of a foreign corporation.
B)A host government refuses to permit a company to use the court system of the owner's country to sue the host government.
C)A host government insists that it must own more than 50 percent of a multinational joint venture.
D)Courts in the host country pass a judgment against the company that cannot be contested by courts in any other nation.

Question 30

Which of the following organizations has the power to enforce the new trade accord that evolved out of seven rounds of General Agreement on Tariffs and Trade (GATT) negotiations, with more than 140 nations participating?

A)The European Union
B)The North American Free Trade Agreement
C)The World Trade Organization
D)The South American Common Market

Question 31

Which of the following terms refers to the taking of private property by a host-country government for either political or economic reasons?

A)licensing
B)franchising
C)expropriation
D)appropriation

Question 32

Which of the following is a form of foreign direct investment?

A)An investor enters into a licensing agreement with a foreign government.
B)A company purchases a warehouse outside the sovereign borders of its parent country.
C)A company enters into an international franchise agreement.
D)A company enters into a joint venture with a government agency in the host country.

Question 33

Environmentalists and consumer groups feared that the ________ would overrule U.S. environmental laws and in other ways infringe on the sovereignty of the nation.

A)World Trade Organization
B)European Union
C)North American Free Trade Agreement
D)South American Common Market

Question 34

Which of the following statements is true of foreign direct investment?

A)The multinational either creates a wholly or partially owned and controlled foreign subsidiary in the host country.
B)It involves permitting a licensee of a trademark to market the licensor's goods or services in a particular nation.
C)It is less risky than international trade and international franchising and licensing.
D)The capital invested is not subject to government restrictions and domestic law of the host country.

Question 35

Which of the following is a reason why nations set up import controls?

A)to prevent the imposition of antidumping duties
B)to prevent foreign companies from destroying home industries
C)to reduce the flow of foreign currency coming into the home country
D)to prevent unfriendly nations from obtaining sensitive goods

Question 36

Which of the following statements is true of the World Trade Organization?

A)Member states have a common tariff barrier against nonmembers.
B)It is intended to create a common market.
C)All members are obligated to harmonize their trade laws or face sanctions.
D)It establishes guidelines for multinational corporations when operating in developed and developing countries.

Question 37

Which of the following is subject to export controls?

A)goods related to a licensing agreement
B)militarily sensitive goods
C)goods related to a franchising agreement
D)intellectual property

Question 38

Which of the following statements is true of the accord that will be supervised by the World Trade Organization (WTO)?

A)It promotes the practice of requiring high local content of materials for manufactured products, such as cars.
B)It addresses a "social dimension" through the establishment of uniform labor and Social Security regulations.
C)It does not allow any internal tariffs among the member states.
D)It prohibits member countries from placing limits on the quantity of imports.

Question 39

Which of the following scenarios best illustrates a franchise?

A)The owner of a coffee plantation agrees to export coffee beans to stores in Italy.
B)An automobile manufacturer imports materials required for car manufacture from a distributor in Canada.
C)An online merchandising company builds a warehouse in Great Britain.
D)A fast food restaurant permits a business owner in Belgium to operate a restaurant that uses its trademark.

Question 40

________ are negotiated between two governments and obligate the host government to extend fair and nondiscriminatory treatment to investors from the other country.

A)Joint ventures
B)Bilateral investment treaties
C)Act-of-state doctrines
D)Sovereign immunity doctrines

Question 41

The primary concerns of Hindu law are national security and collectivization of the economy.

Question 42

Which of the following statements is true of the European Union's Parliament?

A)It can assent to trade agreements with countries outside the European Union.
B)It performs the function of final decision maker in conflicts between European Union law and individual member states.
C)It maintains price stability by lowering or raising interest rates.
D)It coordinates the economic policies of member states.

Question 43

The U.S. Constitution prohibits a state from entering into "any Treaty, Alliance or Confederation."

Question 44

International franchising can reduce the likelihood of political instability being a threat.

Question 45

Which of the following is a dispute resolution process that goes through the judicial system?

A)litigation
B)arbitration
C)mediation
D)conciliation

Question 46

Which of the following is the ultimate goal of the North American Free Trade Agreement (NAFTA)?

A)the creation of a "social dimension" through the establishment of uniform labor and Social Security regulations
B)the establishment of a monetary union through the creation of a single currency for all member states
C)the creation of a totally free trade zone among the three member states
D)the establishment of common prices for all goods exported from member states

Question 47

Gender- and family-based affiliations are examples of acquired group membership.

Question 48

In many countries, Islamic law, as encoded in the Shari'a, exists alongside the secular law.

Question 49

A market economy limits the price that can be charged for goods inside the country.

Question 50

Which of the following statements is true of the arbitration of disputes?

A)It includes a judicial review.
B)It can come about through treaties.
C)It can be regulated though the provision of a choice-of-forum clause.
D)It is considered to be more public than litigation.

Question 51

In the Marxist form of government, economic decisions are centralized.

Question 52

Litigation can be used to resolve a dispute between parties when ________.

A)a waiver of judicial review has been stipulated
B)a less public means of resolving disputes is desirable
C)contracts do not contain arbitration clauses
D)two or more families of law need to be enforced

Question 53

The theory of comparative advantage states that an individual nation should concentrate on exporting the goods that it can produce most efficiently.

Question 54

Which of the following structural units of the European Union is composed of one representative from each of the member nations?

A)the Parliament
B)the Commission
C)the Council of Ministers
D)the European Court of Justice

Question 55

Private international business contracts include a(n) ________ so that the parties know which family of law is to be applied in case of a dispute and what nation's courts will be used.

A)choice-of-forum clause
B)supremacy clause
C)ouster clause
D)foreign commerce clause

Question 56

The ________ planned to create a "common market" of 400 million people and $4 trillion worth of goods.

A)World Trade Organization
B)North American Free Trade Agreement
C)European Union
D)Mercado Commun del Ser Mercosul

Question 57

Countries that follow the Romano-Germanic civil law organize their legal systems around cases, regulations, and precedents rather than around legal codes.

Question 58

One source of international law can be found in decisions of national and regional courts.

Question 59

The ________ is administered by a three-member Trade Commission, which oversees a Secretariat and arbitral panels.

A)North American Free Trade Agreement
B)World Trade Organization
C)European Union
D)Andean Common Market

Question 60

________ is a dispute resolution process whereby parties submit their disagreements to a private individual decision maker they have agreed on or to a panel of decision makers whose selection has been provided for in the contract the parties signed.

A)Prosecution
B)Mediation
C)Litigation
D)Arbitration

Question 61

What impact has the World Trade Organization (WTO) had on corporate investment decision making?

Question 62

Discuss arbitration as a method of dispute resolution.

Question 63

The North American Free Trade Agreement (NAFTA), ratified in 1994, sought to eliminate barriers to the flow of goods, services, and investments among Canada, the United States, and Mexico over a 15-year period.

Question 64

Explain export and import controls.

Question 65

The Council of Ministers of the European Union (EU) consists of 20 members who represent the EU, not national concerns.

Question 66

Members of the World Trade Organization can veto the findings of an arbitration panel.

Question 67

Compare and contrast the common-law system and the civil-law system.

Question 68

There exists a single international court and legal system capable of resolving all commercial disputes between private parties.

Question 69

How are the licensing and franchising methods of engaging in international trade different from one another?

Question 70

Explain how the sovereign immunity doctrine is a risk for companies engaged in international business.

Question 71

The European Central Bank and the European Monetary Union perform the functions of arbiter and final decision maker in conflicts between European Union law and individual member states.

Question 72

Tariffs and quotas are examples of export controls.

Question 73

The World Trade Organization pact makes it more risky for multinationals to have parts built in cheap-labor countries and then brought back to the multinational's home country for use in making a product.

Question 74

Discuss the cultural dimensions of the international environment of business.

Question 75

The goals of the World Trade Organization were to create a "customs union" that would do away with internal tariffs among the member states and to create a uniform external tariff to be applied to all nonmembers.

Question 76

Joint ventures are used in host countries with fewer restrictions on foreign investment.

Question 77

Under the sovereign immunity doctrine, a company whose property has been expropriated cannot press its claims in its own country's courts.