Deck 5: Political and Legal Systems in International Business

Question 1

Corporate managers must adhere to the laws of the country in which they do business.

Answer 1

True

Question 2

Employees working in foreign nations are used by firms to evaluate the political and cultural environment for any potential risks or threats which might harm the firm and its international interests.

Answer 2

True

Question 3

Trade and investment restrictions are often supported by special interest groups.

Answer 3

True

Question 4

Average tariffs have declined over time.

Question 5

The import tariffs on clothing and shoes into the United States often exceed 20 percent, which results in billions of dollars a year for the U.S. government.

Question 6

Products assembled in foreign trade zones are subject to reduced duties and taxes.

Question 7

Maquiladoras along the northern Mexico border enable foreign firms to take advantage of favorable taxes.

Question 8

Which of the following is not a typical principal function of a political system?

A) regulate private sector investments
B) establish stability based on laws
C) provide protection from external threats
D) govern the allocation of valued resources

Question 9

Totalitarian states are characterized by all of the following except ________.

A) dictator-led state political party
B) state-supported religious ideology
C) state-regulated public behavior
D) free flow of information in the mass media

Question 10

The Middle East is an example of a region primarily ruled by which of the following legal systems?

A) religious
B) socialist
C) civil
D) common

Question 11

Common law can best be described as a system ________.

A) designed from political and legislative regulations
B) derived from religious texts and systems
C) developed and recorded in a systematic manner
D) based on legal interpretations of judges

Question 12

Repatriation laws affect MNEs that earn profits in foreign countries by ________.

A) enforcing strict stipulations on cross-border transactions and joint ventures
B) limiting the amount of net income and dividends that can be transferred to the home-country headquarters
C) restricting the amount of money that can be re-invested into the foreign facility
D) imposing restrictions on the distribution of products from the foreign facility

Question 13

Which of the following is the term for a process used by managers to assess potential risks and threats to a firm?

A) scanning
B) Sarbanes reform
C) conciliation
D) arbitration

Question 14

A government policy that impedes trade through means other than explicit taxes is known as a ________.

A) quota
B) tariff
C) price restriction
D) nontariff trade barrier

Question 15

Which of the following is a nontariff trade barrier?

A) import duty
B) franchise tax
C) quota
D) export duty

Question 16

Which of the following is often a result of protectionist policies?

A) higher prices of domestic goods
B) lower prices of domestic goods
C) shortage of domestic goods
D) surplus of domestic goods

Question 17

Which of the following is a rationale for governments imposing offensive trade and investment barriers?

A) the protection of domestic industries
B) the promotion of national security
C) the pursuit of public policy objectives
D) the support of special interests

Question 18

Tariff-based trade barriers can benefit young domestic-based companies by ________.

A) allowing them time to expand and become competitive
B) providing them with government subsidies
C) instigating the growth of a solid infrastructure
D) generating domestic and international sales

Question 19

Governments impose export controls for the purpose of ________.

A) improving available opportunities for domestic sales
B) limiting the number of exported products to certain countries
C) preventing the export of security-related products to specific nations
D) restricting the export of products to all nations during wartime

Question 20

Which of the following is an effect of administrative and bureaucratic procedures?

A) generates government revenue
B) slows down the import of products
C) blocks the entry of imported products
D) reduces the quantity of available goods

Question 21

Nontariff trade barriers have increased in popularity in part because they ________.

A) generate profits for foreign firms
B) can be concealed from the WTO
C) are easy for governments to enforce
D) reduce smuggling along borders

Question 22

The rules of origin requirement can best be defined as which of the following?

A) a voluntary quota in which a firm agrees to limit some exports
B) a formal permission must be obtained to import specific goods
C) a certain amount of production must occur within an economic bloc
D) a set number of exports must originate from either a bloc or a region

Question 23

Which of the following is an example of a government procurement policy?

A) requiring airline carriers to offer reduced rates for government travel
B) imposing additional import taxes on non-domestic made products
C) offering tax breaks to manufacturers that purchase domestic components
D) requiring government cars be purchased from domestic automakers

Question 24

What is the primary ethical concern regarding the import of products from poor countries?

A) poor nations face higher tariffs than developed nations
B) nations lacking economic freedom cannot afford to export
C) emerging nations lack the revenue to pay high tariffs
D) impoverished countries face more import regulations

Question 25

Firms use foreign trade zones in order to ________.

A) stimulate local economic growth and development
B) take advantage of favorable customs regulations
C) create employment opportunities for locals
D) meet quota demands established by the government

Question 26

Many firms have successfully lowered trade and investment barriers by ________.

A) entering joint ventures with competitors
B) petitioning the World Trade Organization
C) lobbying foreign and domestic governments
D) obtaining advice from customs attorneys

Question 27

World Conference
At a world conference assembled in Tokyo, representatives from nearly every country in the world have gathered to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society.

-Representative A is most likely from which of the following countries?

A) Romania
B) Zimbabwe
C) Egypt
D) Australia

Question 28

World Conference
At a world conference assembled in Tokyo, representatives from nearly every country in the world have gathered to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society.

-Representative B is most likely from which of the following countries?

A) Canada
B) North Korea
C) Sweden
D) Australia

Question 29

World Conference
At a world conference assembled in Tokyo, representatives from nearly every country in the world have gathered to discuss issues related to international trade. Representative A is from a totalitarian state. Representative B is from a socialist nation. Representative C hails from a democratic society.

-Representative C is most likely from which of the following countries?

A) Canada
B) Indonesia
C) Pakistan
D) Afghanistan

Question 30

Common and Civil Law
Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding the two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term.

-Which of the following statements is most likely applicable to Country B?

A) Individual rights are less important than state's rights.
B) Ethics and morality are the underlying tenets.
C) Rules and principles are the basis of judicial decisions.
D) Detailed contracts clearly state all potential contingencies.

Question 31

Common and Civil Law
Zane Computer Corporation is considering the possibility of building a new manufacturing facility in a foreign country in order to lower labor and production costs. The legal department of Zane has raised some issues regarding the two countries that are the top contenders for the new facility. The legal system of Country A is based on civil law, while the legal system of Country B is based on common law. Other than the legal systems of the two countries, all other aspects are virtually identical. Zane's legal experts must determine which system would be the most beneficial to Zane in the long-term.

-Which of the following supports Country B over Country A?

A) Most countries in the world follow the principles of common law.
B) The flexibility of common law allows for judicial interpretation in unique cases.
C) Common law nations administer justice based on a structured set of rules.
D) The legislative origin of common law precedents offers judicial equity.

Question 32

Cotton Quota
Cotton growers in the nation of Zanzi export nearly 700,000 bales of cotton every year. Zanzi is the home country for a fabric manufacturing facility that exports high-quality cotton fabric around the world. The government imposed a quota of 1 million bales of cotton that can be imported into Zanzi every year. The local fabric manufacturer is lobbying the government to remove the quota on cotton.

-Which of the following questions would be most important for government officials to evaluate when considering the controversy over the cotton quota?

A) What would be the short-term effect of additional agricultural quotas?
B) What other nations utilize agricultural quotas and what are the effects?
C) What would be the cost of subsidizing the fabric manufacturing facility?
D) What will be the long-term effect of the cotton quota on the Zanzi economy?

Question 33

Cotton Quota
Cotton growers in the nation of Zanzi export nearly 700,000 bales of cotton every year. Zanzi is the home country for a fabric manufacturing facility that exports high-quality cotton fabric around the world. The government imposed a quota of 1 million bales of cotton that can be imported into Zanzi every year. The local fabric manufacturer is lobbying the government to remove the quota on cotton.

-Which of the following supports abolishing the cotton quota over maintaining it?

A) The cotton growers have a competitive edge over foreign cotton growers, and they are profitable.
B) The fabric manufacturer can save money by moving to a country that does not impose cotton quotas.
C) A competing fabric manufacturer is considering opening a production facility in Zanzi.
D) Global cotton prices have fallen in recent years and cotton fabric prices have increased.

Question 34

Cotton Quota
Cotton growers in the nation of Zanzi export nearly 700,000 bales of cotton every year. Zanzi is the home country for a fabric manufacturing facility that exports high-quality cotton fabric around the world. The government imposed a quota of 1 million bales of cotton that can be imported into Zanzi every year. The local fabric manufacturer is lobbying the government to remove the quota on cotton.

-Which of the following would most likely appease both sides of the issue?

A) subsidizing the fabric industry
B) initiating a local content requirement
C) implementing countervailing duties
D) imposing antidumping duties

Question 35

Minimizing Trade Barriers
National Appliance Corporation (NAC) needs to build a new manufacturing facility to meet the increasing demand for professional-grade appliances. NAC managers are considering building the facility in Mexico but are hesitant because of the high tariffs involved. Another possible location for the facility is India; however, the country also imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from other nations.

-Which of the following would be most important for NAC managers to consider when deciding whether to recommend NAC build a facility in Mexico or India?

A) What types of permits are required for NAC to construct a manufacturing facility and what are the building restrictions?
B) How would appliance parts and finished products be categorized when passing through customs?
C) Does either nation have a successful history of manufacturing and importing appliance products?
D) What entry strategies are available in both countries which would allow NAC to minimize import barriers?

Question 36

Minimizing Trade Barriers
National Appliance Corporation (NAC) needs to build a new manufacturing facility to meet the increasing demand for professional-grade appliances. NAC managers are considering building the facility in Mexico but are hesitant because of the high tariffs involved. Another possible location for the facility is India; however, the country also imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from other nations.

-Which of the following best supports a decision to build a plant in Mexico instead of India?

A) foreign trade zones along Mexico's border
B) strict product liability laws and regulations
C) Mexico's close ties with the United States
D) availability of low-cost labor in Mexico

Question 37

Minimizing Trade Barriers
National Appliance Corporation (NAC) needs to build a new manufacturing facility to meet the increasing demand for professional-grade appliances. NAC managers are considering building the facility in Mexico but are hesitant because of the high tariffs involved. Another possible location for the facility is India; however, the country also imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from other nations.

-Which of the following would most likely ensure that NAC paid the lowest tariff possible on the appliances it exports around the world?

A) reduced appliances in production
B) more high-quality appliances
C) accurate product classification
D) balanced production capacity

Question 38

In a short essay, describe how the political and legal systems of a host-country can both harm and benefit a foreign firm.

Question 39

In a short essay describe country risk, and discuss how political and legal systems contribute to country risk. Explain the differences between political systems and legal systems in your answer.

Question 40

What effect does war have on international business? Explain your answer in a short essay and provide an example for illustration.

Question 41

In a short essay, explain the term extraterritoriality. Provide examples to illustrate how extraterritoriality affects international business.

Question 42

What is transparency? In a short essay, explain how transparency varies around the world.

Question 43

What are the four major defensive motives for government intervention? In a short essay, provide a brief explanation of each motive.

Question 44

What is the argument against protectionism? In a short essay, describe the negative effects to the economy when a government intervenes in international trade.

Question 45

In a short essay, explain how foreign trade zones work. How are FTZs utilized by firms?