Question 1

The world's largest transition economy is Japan.

Accepted Answer

The world's largest transition economy is China, not Japan.

Question 2

Firms need both tough customers and competitors to push them.

Accepted Answer

Tough customers and competitors challenge firms to continuously improve their products and services, stay innovative, and maintain their competitive edge in the market. Without this external pressure, firms may become complacent and fail to meet the changing needs and demands of their customers.

Question 3

The theory of competitive advantage forms the basis of modern trade theory.

Accepted Answer

The theory of competitive advantage, developed by economist David Ricardo, forms the basis of modern trade theory. It explains why countries specialize in producing certain goods and how they can benefit from trade with other countries.

Question 4

In China, legal precedent is only used for guidance and does not take on legal status as in common law systems.

Accepted Answer

In China, legal precedent is not considered binding and does not create a legal precedent as in common law systems. It is used only as guidance for future cases.

Question 5

Traditionally, it was thought that a country's success in international business depended on its factors of production

Accepted Answer

Factors of production, such as labor, capital, land, and natural resources, were considered crucial for a country's success in international business in traditional economic theory. However, modern theories also emphasize the importance of technology, innovation, and institutions.

Question 6

Unlike the analysis of Porter's Diamond model, in transition economies, natural resources are not critical.

Accepted Answer

In transition economies, natural resources can still be critical for economic development, although other factors such as political stability, institutional quality, and human capital may play a greater role. The analysis of Porter's Diamond model can still be applicable in transition economies, but it needs to take into account the unique challenges and opportunities of these economies.

Question 7

The global consumer-goods industry is dominated by Asian and Latin American firms.

Accepted Answer

The global consumer-goods industry is dominated by firms from North America and Europe, with companies like Procter & Gamble, Unilever, Nestle, and Coca-Cola being among the largest players in the industry. While there are significant players from Asia and Latin America, they do not dominate the industry.

Question 8

The Diamond model of national competitiveness is designed for emerging economies.

Accepted Answer

The Diamond model of national competitiveness can be applied to both emerging and advanced economies.

Question 9

Socialism is an economic policy in which the state owns all assets of the society.

Accepted Answer

The answer of Socialism is an economic policy in which...

Question 10

Common law systems are primarily built on legal precedent established by judges as they resolve individual cases, and those case opinions have the force of law and strongly influence future decisions.

Accepted Answer

Common law systems, such as those in the United States and United Kingdom, rely heavily on legal precedent established by judges as they make decisions on individual cases. These precedent-setting decisions become part of the body of law and strongly influence future legal decisions.

Question 11

A major flaw in the capitalist system is the idea that it is best to have one big firm, or national champion.

Accepted Answer

Capitalism, in theory, promotes competition and the existence of multiple firms to ensure innovation, efficiency, and consumer choice, rather than advocating for the dominance of a single firm or national champion.

Question 12

The resulting systems of jurisprudence derived from Shari'a can be viewed as quite lenient by most Western standards, where issues of personal behavior are concerned.

Accepted Answer

The resulting systems of jurisprudence derived from Shari'a can be viewed as quite strict by most Western standards, especially when it comes to issues of personal behavior.

Question 13

The belief that the freedom to determine prices and competition without the interference of the government or the guilds would result in the best economic outcome is called laissez-faire economics.

Accepted Answer

This is the definition of laissez-faire economics, which advocates for limited government intervention in the economy.

Question 14

Transition economies continue to deal with the remnants of the old central planning, statist system.

Accepted Answer

Countries that have transitioned from a centrally planned economy to a market-oriented one are commonly referred to as transition economies. These economies are still dealing with the effects of the old system, such as state-owned enterprises and inefficient allocation of resources.

Question 15

Studies have shown that civil law countries have greater protection of investors than do common law countries.

Accepted Answer

Studies generally find that common law countries tend to provide stronger investor protections compared to civil law countries. This is attributed to the common law system's flexibility and the emphasis on case law, which often adapts more quickly to protect investors' rights.

Question 16

In a 22-country survey published in 2006, Germany was the only country that disagreed with the statement that the best system is ''the free-market economy.''

Accepted Answer

The survey actually found that Germany was not the only country disagreeing with the statement; several countries had mixed or negative views on the free-market economy, reflecting a variety of opinions on economic systems across different nations.

Question 17

According to the Economic Freedom Rating, the U.S. has continued to be ranked as the freest market in the world for a number of years.

Accepted Answer

The U.S. has not consistently been ranked as the freest market in the world; other countries like Hong Kong and Singapore have often been ranked higher in terms of economic freedom.

Question 18

The institutional approach emphasizes the socio-political-cultural factors that affect decision making and actions in subtle but profound ways.

Accepted Answer

The institutional approach does indeed emphasize the influence of socio-political-cultural factors on decision making and actions. It recognizes that institutions and their norms shape individual and group behavior, and that these institutions are themselves shaped by historical and cultural contexts.

Question 19

Muslims will often, but not always, be guided by Shari'a-based law even if they do not live in a country that is governed by that law.

Accepted Answer

Shari'a-based law is derived from Islamic teachings and principles, and many Muslims may choose to follow it even if they live in non-Muslim countries. However, this is not always the case, and some Muslims may choose to follow the laws and customs of the country they are living in.

Question 20

A market-based economic system is based on the negotiated establishment of prices between buyers and sellers of goods and labor.

Accepted Answer

A market-based economic system relies on the forces of supply and demand to determine the prices of goods and labor through transactions between buyers and sellers. Prices are determined through negotiation and competition in the marketplace, rather than being dictated by a central authority or government.

Quiz 3: The Economic, Legal, and Political Environment