Question 1

The rule of man, a practice that has been in play for millennia, presumes that the law is the will of the ruler, whether the king, czar, raj, or emperor.

Accepted Answer

The statement correctly defines the rule of man as a practice where the law is seen as the will of the ruler, and this practice has been in place for a long time.

Question 2

Skinner Electronics plans to expand into foreign markets.Top executives want the firm to focus only on locations where the rule of law prevails.Which of the following should most likely be considered by Skinner?

Accepted Answer

Wealthier, westernized countries are more likely to have established rule of law and regulatory infrastructure, making them a safer bet for Skinner Electronics to expand into.

Answer: D should be avoided. Totalitarian-style governments are less likely to have a reliable rule of law and may pose significant business risks for Skinner.

B and C are less clear cut and may depend on specific circumstances. Developing, non-Western countries may offer growth opportunities, but their regulatory environment can be unpredictable. Emerging economies experiencing rapid growth may also offer opportunities but should be approached with caution as their government institutions may not yet be fully developed or established.

Question 3

Logan Electronics has a production facility in Bolivia.Recently, the firm was taxed at a significantly higher rate than a local electronics company.Which type of political risk is Logan most likely experiencing?

Accepted Answer

The answer of Logan Electronics has a production facility in...

Question 4

A U.S.firm with manufacturing facilities in Nigeria will most likely be faced with a ________ legal system.

Accepted Answer

Nigeria operates a mixed legal system, incorporating elements of English common law, Islamic law (in some northern regions), and traditional customary law. This reflects the country's colonial history, diverse ethnic groups, and religious practices.

Question 5

Civil conflict, tax discrimination, weak legal systems, and terrorist actions are political risks faced by MNEs operating in foreign countries.

Accepted Answer

These political risks can make it difficult for MNEs to operate successfully in foreign markets, as they can lead to instability and uncertainty. Civil conflict, tax discrimination, weak legal systems, and terrorist actions can all negatively impact MNEs and their operations. It is important for MNEs to carefully assess these risks before entering a foreign market and to develop strategies for managing them.

Question 6

Political risk insurance is more likely to be purchased by MNEs that apply an active approach to political risk management.

Accepted Answer

The answer of Political risk insurance is more likely to...

Question 7

A system of ________ law sets the framework for the system of government and defines the authority and procedure of political bodies to establish laws and regulations.

Accepted Answer

Constitutional law establishes the framework for a government's authority and power, including the process for creating laws and regulations. Criminal law deals with offenses against the public and individual members of society, civil law addresses disputes between individuals or groups, and commercial law regulates business and commercial transactions.

Question 8

Rockwall Enterprises is planning to expand the firm by establishing operations outside of the United States.In which of the following countries would Rockwall most likely be able to establish operations most quickly?

Accepted Answer

Australia has a well-developed and stable economy with a business-friendly environment, a skilled workforce, and a transparent legal system. Therefore, Rockwall Enterprises would likely be able to establish operations quickly in Australia. Japan, Germany, and Brazil may have more complex regulations, cultural differences, and bureaucratic procedures, which could slow down the process of establishing operations in these countries.

Question 9

Which of the following is NOT a component of modern legal systems?

Accepted Answer

Private law is actually a component of modern legal systems, focusing on relationships between individuals, such as contracts and property law, rather than being something outside of these systems. The question asks for what is NOT a component, and since private law is a component, it does not fit as the correct answer to the question as phrased. However, all options listed (constitutional law, criminal law, commercial law, and private law) are indeed components of modern legal systems, making the premise of the question misleading.

Question 10

A ________ law system is based on a systematic and extensive codification of laws and puts political officials in charge of specifying accessible, detailed, and written law that applies to all citizens.

Accepted Answer

A civil law system is based on codified laws that are written down and accessible to all citizens. Political officials are responsible for creating and enforcing these laws, which apply to everyone within the jurisdiction. Customary law is based on tradition and unwritten practices, while common law is based on legal precedent and case law. Theocratic law is based on religious texts and principles.

Question 11

Compare and contrast the rule of law and the rule of man.

Accepted Answer

The answer of Compare and contrast the rule of law...

Question 12

Multilateral development banks encourage development in risky environments through financial incentives.

Accepted Answer

Multilateral development banks often provide financial incentives such as concessional loans or grants to encourage investment and development in risky environments such as conflict-affected countries or areas with weak governance structures. These incentives aim to mitigate the perceived risks and attract funding from private investors or other development organizations.

Question 13

Managers who take an active approach to political risk management are likely to rely on statistical modeling to quantify the precise degree of political risk.

Accepted Answer

The answer of Managers who take an active approach to...

Question 14

How does a nation's legal environment affect an MNE's marketplace behavior, especially when the rule of man prevails?

Accepted Answer

The answer of How does a nation's legal environment affect...

Question 15

Which of the following statements about approaches to political risk management is NOT true?

Accepted Answer

Passive political risk management encourages hedging against exposure to political hazards, whereas this statement suggests that it discourages it.

Question 16

The ________ of a country specifies the rules that regulate behavior, the processes by which laws are enforced, and the procedures used to resolve grievances.

Accepted Answer

The legal system of a country is responsible for enacting and enforcing laws, rules, and procedures that regulate behavior, address grievances, and provide justice. While the political system, political philosophy, and philosophical orientation of a country can influence the development and implementation of its legal system, it is the legal system that ultimately prescribes the rules and processes by which individuals and institutions are held accountable.

Question 17

A ________ law system is based on tradition, judge-made precedent, and usage and assigns a preeminent position to existing case law as a guide to dispute resolution.

Accepted Answer

A common law system is based on judge-made precedent and existing case law. While customary law also relies on tradition and usage, it is not necessarily based on judge-made precedent. Theocratic law is based on religious texts, and civil law systems rely more heavily on written statutes than on precedent.

Question 18

Ian, a financial manager, is preparing to transfer to Germany where he will serve as an expatriate manager of his employer's European office.Which type of legal system will Ian most likely have to deal with in Germany?

Accepted Answer

Germany has a civil law legal system, also known as Roman law legal system. In this system, laws are based on written codes and decisions made by judges in previous cases. This is in contrast to common law systems, where laws are based on court decisions and precedents. Mixed and theocratic legal systems are not commonly found in Europe.

Question 19

Harmon Clothing has a production facility located in Venezuela.Recently, Harmon has been unable to arrange for overseas loans due to the burdensome regulatory policies of the Venezuelan government.Which type of political risk is Harmon most likely experiencing?

Accepted Answer

Systemic political risk involves changes in policies or regulations that affect all companies operating within a country. Harmon's inability to secure overseas loans due to the Venezuelan government's regulatory policies is an example of systemic risk, as these policies likely affect all businesses in the country, not just Harmon.

Question 20

Barkely Enterprises, a U.S.manufacturer, received assistance from the Overseas Private Investment Corporation when it expanded operations into Saudi Arabia.Which of the following types of support did Barkely most likely receive from OPIC?

Accepted Answer

OPIC provides political risk insurance to American businesses operating in foreign countries. Given that Barkely Enterprises expanded operations into Saudi Arabia, it is likely that they received political risk insurance from OPIC to protect against potential political risks in the country.

Quiz 3: The Political and Legal Environments Facing Business