Question 1

What do value added taxes (VAT) encourage in countries such as China?

Accepted Answer

Value added taxes (VAT) often result in cross-border shopping, as consumers will seek out lower prices in neighboring countries with lower VAT rates. This can lead to increased competition among businesses and pressure for governments to keep VAT rates low. As China has a relatively high VAT rate, this may encourage cross-border shopping in nearby countries.

Question 2

As the ruble's value fell through most of 2014, European firms began to feel the effects.

Accepted Answer

The ruble's value did fall through most of 2014 and European firms were impacted by this.

Question 3

If a foreign company is taken over by the host country government, and some form of compensation is paid, "expropriation" has occurred.

Accepted Answer

When a foreign company is taken over by a host country government and compensation is paid, it is considered expropriation.

Question 4

Any company doing business outside the home country should first carefully study the ________ in the target country.

Accepted Answer

Political culture refers to the beliefs, values, and practices of a society regarding government and politics. Understanding the political culture of a target country is crucial for companies doing business abroad because it will affect the legal and regulatory environment, as well as the attitudes and behavior of local stakeholders towards foreign businesses. Companies need to conduct research on the political system, government policies, and political stability of the target country to avoid potential risks and maximize opportunities.

Question 5

In Great Britain, the Wine and Spirit Association estimates that, on average, cars returning from France are loaded with 80 bottles of wine. This is most likely due to:

Accepted Answer

The high excise and VAT taxes make wine much cheaper to purchase in France than in Great Britain. Therefore, people often load their cars with a large amount of wine when returning from France.

Question 6

The roots of modern international law can be traced to the twentieth-century Peace of Westphalia.

Accepted Answer

The roots of modern international law can be traced back to the Peace of Westphalia, which occurred in 1648, marking the end of the Thirty Years' War in Europe. This event is often considered the beginning of the state system and the principles of sovereignty and non-interference in the affairs of other states, foundational to modern international law.

Question 7

Various types of political risk insurance to U.S. companies is provided by:

Accepted Answer

The correct option is E, which stands for the Overseas Private Investment Corporation (OPIC). OPIC is a U.S. government agency that provides various types of political risk insurance to American companies doing business overseas, including coverage for expropriation, currency inconvertibility, and political violence. The other options, such as BERI, PRS Group, EIU, and WTO, are not providers of political risk insurance, but rather institutions that assess political risks or provide international business intelligence.

Question 8

Bureaucracy is listed as a political risk category by:

Accepted Answer

The answer of Bureaucracy is listed as a political risk...

Question 9

Categories of political risk listed by EIU (Economist Intelligence Unit) include all of the following except:

Accepted Answer

The categories of political risk listed by EIU include war, politically motivated violence, international disputes, and corruption. Social injustice is not listed.

Question 10

If a foreign company is taken over by a host country government, and some form of compensation is paid, "confiscation" has occurred.

Accepted Answer

When a foreign company is taken over by a host country government and some form of compensation is paid, it is referred to as "nationalization" or "expropriation," not "confiscation." Confiscation typically involves the taking of property without the payment of compensation.

Question 11

The high level of political risk currently evident in Russia can be attributed in part to:

Accepted Answer

The environment of uncertainty for foreign companies is a major contributor to the high level of political risk in Russia. This includes factors such as unpredictable government regulations and interventions, corruption, and a lack of rule of law. Changes in the name or flag of the country, excessive IMF loans, and participation in the WTO are not significant factors in the current political risk in Russia.

Question 12

In Europe, individual EU countries gave up the right to have their own currencies, ceded the right to set their own product standards, and have made other sacrifices in exchange for improved market access.

Accepted Answer

This statement is true. EU countries that joined the Eurozone gave up the right to have their own currencies, while all EU countries have to follow EU product standards to ensure the free movement of goods within the EU single market.

Question 13

A current global phenomenon in both nonmarket and market structures is the trend toward capitalism.

Accepted Answer

The answer of A current global phenomenon in both nonmarket...

Question 14

Terms like crony capitalism and kleptocracy refer to rampant corruption and bribery within capitalism.

Accepted Answer

The answer of Terms like crony capitalism and kleptocracy refer...

Question 15

Russian consumers have little choice but to "buy local" since farmed salmon has expanded to keep up with booming demand.

Accepted Answer

Russian consumers have limited access to farmed salmon due to sanctions and geopolitical tensions, leading to a reliance on domestic sources which may not fully meet the booming demand.

Question 16

The governmental action to dispossess a foreign company or investor is known as:

Accepted Answer

Expropriation is the governmental action to dispossess a foreign company or investor of their assets or property within a country. This can occur either with or without compensation. Confiscation is a similar action but is typically associated with illegal or illicit activities, such as smuggling or drug trafficking. Nationalization is the transfer of privately owned property or assets to government ownership or control. Internationalization refers to the integration of economies, cultures, and societies around the world. Compensation refers to the payment or reimbursement for something, typically as a remedy for a loss or damage suffered.

Question 17

The Brexit issue can be viewed as a mandate by Britons to regain some of what their nation lost to the "collective sovereignty" of the EU28.

Accepted Answer

Many supporters of Brexit argue that the decision to leave the EU was a way for Britons to regain control over their own laws, borders, and economy, which they believe had been eroded by the EU's "collective sovereignty". Therefore, it can be viewed as a mandate to regain some of what they feel had been lost to the EU.

Question 18

________ refers to governmental action to dispossess a foreign company or investor. Compensation is generally provided, often not in the "prompt, effective, and adequate" manner provided for by international standards.

Accepted Answer

Expropriation refers to governmental action to dispossess a foreign company or investor. Compensation is generally provided, often not in the "prompt, effective, and adequate" manner provided for by international standards. Nationalization is similar to expropriation, but refers specifically to the transfer of assets from private to state ownership. Confiscation and deportation are not related to this concept. Internationalization is not a term commonly used in this context.

Question 19

British Petroleum, British Airways, and Rolls-Royce were privatized under Margaret Thatcher's administration.

Accepted Answer

Margaret Thatcher's administration privatized British Petroleum, British Airways, and Rolls-Royce.

Question 20

Which of the following statements does not reflect performance and service provided by Uber nationally and internationally?

Accepted Answer

The answer of Which of the following statements does not...

Quiz 5: The Political, Legal, and Regulatory Environments