Deck 6: Political and Trade Forces

Question 1

Kidnap, ransom, and extortion are techniques often used by terrorists against which no insurance is available.

Answer 1

False

Question 2

When government-owned companies compete with private companies, the private companies have the advantage.

Answer 2

False

Question 3

The only reason firms are nationalized is to spread a socialist-communist ideology.

Answer 3

False

Question 4

The practice of country risk assessment is an exercise in xenophobic and ethnocentric thinking.

Question 5

Country risk assessment is a measure of the threat of nationalization.

Question 6

Paying ransom makes sense because a life is saved and the payments can be traced.

Question 7

Terrorists avoid kidnapping because the repercussions can be harmful to their movement.

Question 8

Only in communist countries do governments own the factors of production.

Question 9

Country risk assessment is an evaluation that assesses a country's political situation and policies to determine how much risk exists of a change in that country's government.

Question 10

Country risks are increasingly political in nature.

Question 11

When people are kidnapped for ransom, the right response is to pay the ransom, get the hostages released, and then retaliate.

Question 12

Policy continuity and government stability are more important to a business than the type of political system.

Question 13

A historical function of capitalist-but not communist-governments has been the protection of the economic activities within their geographic area of control.

Question 14

Former British prime minister Tony Blair led the privatization movement.

Question 15

When the U.S. military contracts out security details in war zones, it is engaged in privatization.

Question 16

Zimbabwe's government offers an example of government instability.

Question 17

One example of nationalization of private companies is the nationalization of French-owned firms in Europe after World War II.

Question 18

To hedge the terrorism risk, there are insurance, antiterrorist schools, and even companies to handle negotiations.

Question 19

Businesses favor unstable governments because they present more profit opportunities.

Question 20

Unlike the topography, the political climate of a country has relatively little influence on its exports.

Question 21

Subsidies from the United States to its sugar industry have been critical in helping to prevent a loss of jobs from American companies that are high users of sugar.

Question 22

New types of dumping include concession dumping.

Question 23

The national defense argument for trade restrictions is based on the development level of the country.

Question 24

Sanctions are a trade restriction that is effective in forcing change.

Question 25

To protect an infant industry, trade restrictions might be effective.

Question 26

A comparison based on hourly wages is a reasonable guide to a need to protect domestic jobs.

Question 27

Tariff barriers may be used to protect domestic industry from foreign, lower-cost producers.

Question 28

Trade restrictions violate the spirit of the WTO.

Question 29

U.S. ocean shipping companies are benefiting from U.S. government subsidies.

Question 30

Subsidies that confer a benefit may well evoke countervailing duties.

Question 31

The types of information a firm will need to judge country risks vary according to the nature of its business and the amount of money invested.

Question 32

The government officials who make decisions about import restrictions are particularly sensitive to their country's broad population of consumers, who will be hurt by international competition.

Question 33

The length of the investment in a foreign country has no impact on the risk assessment for that investment. What matters is the economic and political situations in the country.

Question 34

A compound duty is a combination of specific and variable duties.

Question 35

Protection of infant industries through trade restrictions is used only in developing nations.

Question 36

The utility of risk analyses of social, political, and economic factors increases rapidly over longer time spans.

Question 37

One way that the WTO defines dumping is the selling of a product abroad for less than the average cost of production in the importing nation.

Question 38

Fair competition is a strong rationale for trade barriers.

Question 39

Retaliatory trade restrictions are not made for dumping because price competition is protected by the WTO.

Question 40

New types of dumping include tax dumping.

Question 41

Voluntary export restraints are imposed by the importing nation to avoid violating WTO rules.

Question 42

Privately owned companies sometimes complain that government-owned companies have the following unfair advantages:

A) higher-cost financing.
B) ability to charge higher prices.
C) access to government contracts.
D) all of the above.
E) two of A, B, and C.

Question 43

Duties may be used to encourage local input.

Question 44

Zimbabwe is an example of:

A) a richly endowed country that has suffered because of government instability.
B) a government that expropriated private property, that is, nationalized it, and then redistributed it.
C) a country whose leadership stole the 2008 election.
D) all of the above.
E) two of A, B, and C.

Question 45

The reasons a government may nationalize a firm include:

A) to get government contracts.
B) to promote the ideology of capitalism.
C) to preserve jobs.
D) all of the above.
E) two of A, B, and C.

Question 46

The national defense argument for trade restrictions suggests that some industries, even if they are not competitive, need protection from imports.

Question 47

Kidnapping:

A) two of B, C, andD
B) is a weapon used by some terrorists to extract ransom.
C) can result in counterproductive results if ransom is paid for hostages.
D) Both B and C are correct, so A is the appropriate response. KRE insurance refers to kidnapping, ransom, and extortion.
E) all of B, C, and D.

Question 48

Nationalization and privatization are:

A) similar trends.
B) opposing trends.
C) both risks faced by privately held firms.
D) both risks not encountered in capitalist democracies.
E) two of the above.

Question 49

Nuisance tariffs require importers to go through the administrative paperwork connected to paying tariffs, even though the payment itself might be quite small.

Question 50

Voluntary export restraints are imposed by the importing nation to avoid violating WTO rules.

Question 51

Nontariff barriers that are not quantitative can be divided into two groups, those that are established by the government participation in trade and those that are administrative.

Question 52

With privatization:

A) assets are transferred from the public sector to the private sector.
B) stock is bought back so that the company no longer has public shareholders.
C) state activities are moved into private management through contracts.
D) all of the above.
E) two of A, B, and C.

Question 53

Sanctions against nations are not a form of trade restriction because the motivation is political.

Question 54

Government stability is a characteristic of a government that:

A) makes sudden radical policy changes.
B) readily shifts alliances to maintain power.
C) maintains predictability in fiscal, monetary and political policies.
D) two of the above.
E) all of A, B, and C.

Question 55

Government protection of economic activities is:

A) two of the following.
B) a historical function of government.
C) a recent responsibility of government.
D) a socialist characteristic.
E) stronger in democracies.

Question 56

Trade barriers create costs that are paid by the government erecting the barrier.

Question 57

Government stability is understood to refer to a government's:

A) policies-their ability to endure over time.
B) ability to keep itself in power.
C) two of A, B, andD
D) Both A and B are described by the term government stability, so C is the appropriate response.
E) all of A, B, and D.

Question 58

The reasons a government may nationalize a firm include:

A) to extract more money from the firm.
B) to increase the firm's profitability.
C) to preserve jobs.
D) all of the above.
E) two of A, B, and C.

Question 59

The Multi-Fiber Arrangement (MFA) was an orderly marketing arrangement to regulate textiles and clothing exports.

Question 60

A variable levy confers benefit on the domestic producer, as with the EU variable levy on grain.

Question 61

Counterarguments to the "protect domestic jobs from cheap foreign labor" argument include:

A) the labor rate is not all of the labor cost or the production cost.
B) productivity per worker is what matters.
C) cheap foreign labor is a natural occurrence.
D) two of the above.
E) all of A, B, and C.

Question 62

In the United States, the Smoot-Hawley Tariff Act:

A) outlawed tariffs for U.S. imports.
B) led to the Wall Street crash of 1929.
C) established some of the highest tariffs the United States has known.
D) two of the above.
E) all of A, B, and C.

Question 63

According to the text, the type of information a firm will need to judge country risks:

A) none of B, C, and
B) varies according to the nature of its business.
C) varies according to its size.
D) The type of information a firm will need to judge country risks varies according to the nature of its business and the length of time required for the investment, loan, or other involvement to yield a satisfactory return.
E) two of B, C, and D.

Question 64

The national defense argument for trade restrictions has been used in the United States to argue for restriction on imports of:

A) munitions.
B) uniforms.
C) The U.S. shoe industry is mentioned in the text.
C) shoes.
E) two of A, B, and C.

Question 65

Social dumping occurs when an exporting country:

A) imposes an export tax on domestic businesses that export, to compensate for the opportunity cost to the domestic market.
B) creates unfair competition based on lower costs, which undermines social support systems to the worker.
C) target-markets to specific vulnerable groups in the importing country.
D) exports goods that are not sellable in the domestic environment due to hazards and safety issues.
E) two of the above.

Question 66

The trend for firms in regard to country risk assessment (CRA) is to:

A) avoid it as an added cost in competitive markets.
B) concentrate much more on CRA in making decisions about foreign activities.
C) use CRA in obviously dangerous locations, but only in those situations.
D) all of the above.
E) two of A, B, and C.

Question 67

Among the external businesses that conduct country risk assessment are:

A) the Economist Intelligence Unit, Euromoney, the Harvard Business Review
B) Moody's, Standard and Poor's, STRATFOR
C) The organizations listed in A and B are mentioned as the leading external firms in CRA, so D is the correct response.
D) two of the above.
E) all of A, B, and C.

Question 68

What is the role of the home country in risk assessment?

A) It has no role.
B) It is a significant consideration.
C) The home country of the parent company is thought to play a significant role in CRA.
D) None of the above.
E) Two of A, B, and C.

Question 69

Dumping is:

A) selling a product abroad for less than its production cost in the importing nation.
B) selling a product abroad for less than the market price in the export nation.
C) exporting a product to a third country without correct documentation.
D) two of the above.
E) all of A, B, and C.

Question 70

Cultural dumping is found in:

A) Japan's past refusal to import American skis because Japanese snow is different, so the skis should meet different standards.
B) Saudi Arabia's refusal to import Playboy magazine.
C) The small town of Orleans, Massachusetts, decision to prohibit franchised stores from operating in the town.
D) two of the above.
E) all of A, B, and C.

Question 71

New types of dumping include:

A) cultural, social, financial services, and tax dumping.
B) truck, financial services, and black-market dumping.
C) gray-market, subsidiary, and transfer-pricing dumping.
D) two of the above.
E) all of A, B, and C.

Question 72

Arguments for trade restrictions include:

A) national defense, infant industry, and job protection.
B) punishment of offending nations.
C) fair competition and retaliation.
D) all of the above.
E) two of A, B, and C.

Question 73

The primary motivation of tariffs is to:

A) raise government revenue at the cost of importers.
B) raise the price of imports, to protect domestic goods.
C) punish countries over political issues.
D) encourage foreign consumption.
E) none of the above.

Question 74

The United States became one of the first countries to prohibit dumping into its own market, in:

A) 2006.
B) 1856.
C) 1916.
D) 1776.
E) none of the above.

Question 75

Financial dumping is:

A) sending excess financial resources to other nations.
B) a government's decision to subsidize low interest rates for purchases of its exports.
C) allowing a bank to have a low level of capital to total assets.
D) all of the above.
E) two of A, B, and C.

Question 76

Subsidies are problematic because they:

A) are administered as a form of political patronage.
B) aid export businesses or protect domestic businesses from imports.
C) encourage nationalization.
D) violate UN agreements.
E) two of the above.

Question 77

International business can be a powerful political force, in part because:

A) a recent Supreme Court ruling in the United States allows corporate contributions to political races.
B) many top management team members are willing to accept roles with national security agencies.
C) about half the world's 100 largest economic units are firms.
D) business is all about achieving political goals.
E) two of the above.

Question 78

An example of environmental dumping can be found in the:

A) maquiladora plants of Mexico, located near the U.S. border and operating at lower environmental standards than would be required in the United States.
B) nuclear waste shipments to developing nations.
C) garbage shipments from New Jersey to developing nations.
D) all of the above.
E) two of A, B, and C.

Question 79

An argument against the protection of an infant industry is that:

A) in the long run the industry will have a competitive advantage.
B) firms need protection from imports until the required investment capital is obtained.
C) protection of emerging industries occurs only in developing nations.
D) there can be high costs from subsidizing infant industries.
E) Two of the above.

Question 80

An argument against using trade restrictions to punish an offending nation is that:

A) sanctions seldom achieve their goal of forcing change in the offending country.
B) sanctions are relatively harmful to the citizens of the offending country.
C) sanctions are not condoned by the UN.
D) sanctions decrease the cost of doing business.
E) two of the above.