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chapter 6
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Indicate whether the statement is true or false.
1. Very little role for government exists in a purely capitalistic or “free market” economic system.
a.
True
b.
False
2. The openness of democratic countries, and the protections such countries tend to generally provide for
property rights and freedom of expression, usually make those countries more hospitable places to conduct
global business than countries with totalitarian or semi-totalitarian political regimes.
a.
True
b.
False
3. China, with its strong individualistic, entrepreneurial, free-market spirit, historically has been viewed as the
leading economically capitalistic economy in the world.
a.
True
b.
False
4. Prolonged civil war in a politically unstable country is an example of a macropolitical risk.
a.
True
b.
False
5. The rise of ISIS has increased the political risk of Middle Eastern countries doing business with the United
States.
a.
True
b.
False
6. Restrictions on the transfer or exchange of a given foreign country's currency is an example of an economic
risk.
a.
True
b.
False
7. Patent rights generally remain enforcable for 5-20 years, depending on the invention and the country.
a.
True
b.
False
8. Rankings of countries throughout the world by potential political risks typically place Scandinavian and
European countries such as Norway, Sweden, Switzerland, Luxembourg and Denmark near the top of the list,
meaning that companies engaging in business in these countries face the least number of potential political
risks.
a.
True
b.
False
9. Fortunately for global businesses, economic risks are independent of political risks.
a.
True
b.
False
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10. Tax law is the body of law governing legally enforceable agreements between parties to engage in economic
exchange.
a.
True
b.
False
11. Singapore historically has had a highly anti-business political system in a parliamentary model context, with
one ruling party, in power since 1959.
a.
True
b.
False
12. In the United States, companies generally operate under a regime of caveat emptor, or "buyer beware."
a.
True
b.
False
13. In the world today, Islamic law, as followed in countries such as Iran and Saudi Arabia, is the primary
example of theocratic law in operation.
a.
True
b.
False
14. Under Communist economic ideology, collectivistic rights give way in the extreme to individual rights.
a.
True
b.
False
15. Totalitarian government refers to a form of government in which total (all) citizenry have the right to vote.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
16. “Coca-Cola,” the Nike “swoosh” logo, and McDonald’s “golden arches” are examples of _____.
a.
intellectual property
b.
patents
c.
trademarks
d.
generalized trademarks
e.
contracts
17. Most, if not all, democracies today are what are known as _____ democracies.
a.
athenian
b.
totalitarianism
c.
representative
d.
egalitarian
e.
communism
18. Laws to promote “fair competition” among businesses are known as _____ laws.
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a.
tax
b.
common
c.
contract
d.
theocratic
e.
antitrust
19. Which of the following is an example of corruption?
a.
Paying a bribe to a company executive in order to be awarded a contract.
b.
Damaging equipment in a factory to protest treatment of workers.
c.
Lobbying a congresswoman to vote for a tax cut for business.
d.
Urging union workers to go on strike in order to gain concessions.
e.
Raising the price on a product in order to make a profit
20. Of the following statements, which is NOT true about democracies?
a.
Democracy is Greek for “rule by the people.”
b.
Most, if not all, democracies today are what are known as athenian democracies.
c.
Some democracies, such as Japan, Spain, and Great Britain, also have ceremonial monarchs
d.
Opposite democracies are totalitarian countries.
e.
Athenian democracy was developed around 500 BCE.
21. A party wishing to sell a given piece of commercial real estate to another party would enter into a real estate
agreement with the other party. This is an example of which type of law?
a.
Tax
b.
Common
c.
Contract
d.
Theocratic
e.
Criminal
22. _____ corruption is business corruption involving other private businesses, individuals, or groups.
a.
Public
b.
Private
c.
Open
d.
Closed
e.
External
23. The _____ is a U.S. law that prohibits U.S. companies from bribing or otherwise corrupting foreign
government officials to win foreign government contracts or obtain other foreign government assistance for
their businesses.
a.
Foreign Corrupt Practices Act
b.
Overseas Private Investment Act
c.
Terrorism Risk Insurance Act
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d.
Antitrust Act
e.
United We Stand Act
24. A recent survey found this nation to be the most dangerous in the world.
a.
Croatia
b.
Saudi Arabia
c.
China
d.
North Korea
e.
Somalia
25. The words “aspirin,” “escalator,” and “zipper” are examples of _____.
a.
intellectual property
b.
patents
c.
trademarks
d.
generalized trademarks
e.
contracts
26. A legal system where legislative bodies generally enact specific legal rules giving judges or courts
considerable authority in interpreting these rules based on precedent and other factors is called a _____ law
legal system.
a.
civil
b.
common
c.
theocratic
d.
representative
e.
family
27. A country that has particularly militant labor unions known for frequent unplanned or wildcat strikes, or
perhaps a country known for holding corporate executives hostage until their demands are met, are examples of
_____ risk.
a.
political
b.
environmental
c.
individual
d.
economic
e.
financial
28. Of the following statements, which is NOT true about totalitarian governments?
a.
Totalitarian governments always have weak economies.
b.
A country run by a military dictatorship would be an example of a totalitarian government.
c.
Totalitarian governments rule without the support or consent of the citizens.
d.
An absolute monarchy is an example of a totalitarian government.
e.
The dictatorships that prevailed in Eastern Europe during the Cold War were examples of totalitarian
governments.
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29. In this form of government, all citizens vote directly on matters affecting the community
a.
Athenian democracy
b.
Totalitarianism
c.
Representative democracy
d.
Egalitarian
e.
Communism
30. Which of the following is NOT true about capitalism?
a.
Capitalism refers to an economic system where businesses are privately owned with a strong
individualistic profit orientation.
b.
Very little role for government exists in a purely capitalistic or “free market” economic system.
c.
Individual gains and losses of wealth can be very large.
d.
Individual incentives are at the core of capitalistic economic ideology.
e.
Passage of the Patient Protection and Affordable Care Act marked the United States' movement away
from capitalism.
31. Which of the following is a U.S. government agency that sells political risk insurance to U.S. businesses
operating in countries with which the U.S. has a bilateral investment treaty?
a.
Foreign Corrupt Corporation
b.
Overseas Private Investment Corporation
c.
Terrorism Risk Corporation
d.
Antitrust Corporation
e.
United Corporation
32. Paying “protection money” or giving sales kickbacks to an organized crime group would represent at
example of _____ corruption.
a.
public
b.
private
c.
open
d.
closed
e.
external
33. Unlawful acts of violence threatening the physical safety of others is called _____.
a.
blackmail
b.
extortion
c.
economic risk
d.
terrorism
e.
corruption
34. Of the following statements about common law legal systems, which is NOT true?
a.
They originated in China under the Ming Dynasty.
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b.
A key advantage of common law systems is that judges have a fair amount of flexibility to change
their interpretations of the law based on changing societal developments.
c.
One downside of the common law approach is that judges can often interpret the law as they see fit.
d.
It is a legal system where legislative bodies generally enact specific legal rules giving judges or
courts considerable authority in interpreting these rules based on precedent and other factors.
e.
Some say that in common law countries it is often appointed judges who “make the law” rather than
elected legislators.
35. A 2013 survey asked individuals whether they or someone in their household had paid a bribe in the past 12
months. The survey found the bribery rate in the United States was between ______.
a.
1 and 4.9 percent
b.
5 and 9.9 percent
c.
10 and 14.9 percent
d.
15 and 19.9 percent
e.
20 and 24.9 percent
36. Which is the largest nation in the world with a communist economic ideology?
a.
China
b.
Russia
c.
Vietnam
d.
India
e.
South Africa
37. In a civil law country, the real power lies with
a.
labor unions and public works employees.
b.
the legislative branch of government.
c.
the judiciary.
d.
corporations and banks.
e.
the executive branch of government.
38. According to the text regarding a study of corporate bribery in developed countries conducted by
Transparency International, which of the following nations had the most corporate bribery?
a.
Russia
b.
the United States
c.
Hong Kong
d.
Japan
e.
Singapore
39. Which of the following is NOT true about socialism?
a.
Socialism involves an economic ideology in which the government or state plays a strong role in the
economy and may own stakes in certain businesses.
b.
Countries with socialist economies aspire to be “classless.”
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c.
Socialistic economies tend to be somewhat more collectively than individualistically oriented.
d.
Many European countries have strong socialistic orientations.
e.
Socialistic countries put a high degree of importance upon worker and labor rights.
40. Which of the following laws provides for (after a certain deductible) U.S. government insurance coverage
for the risk of a U.S. business or property being attacked by a “foreign person or foreign interest?”
a.
Foreign Corrupt Practices Act
b.
Overseas Private Investment Act
c.
Terrorism Risk Insurance Act
d.
Antitrust Act
e.
United We Stand Act
41. A legal system based on a comprehensive listing of legal rules in sets of written codes of law is known as a
_____ law legal system.
a.
civil
b.
common
c.
theocratic
d.
representative
e.
family
42. _____ risks are the risks that political forces or problems in a given country will have a meaningful negative
impact upon the conduct of business in that country.
a.
Political
b.
Environmental
c.
Individual
d.
Economic
e.
Financial
43. The practice of making illegal payments to government officials or engaging in blackmail, extortion, or
other related activities to obtain government contracts or governmental approval for business activities is called
_____ corruption.
a.
public
b.
private
c.
open
d.
closed
e.
external
44. A country’s potential nationalization of companies in the automobile industry would represent a(n) _____
risk.
a.
marketing
b.
environmental
c.
individual
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d.
macropolitical
e.
micropolitical
45. _____ involves an economic ideology in which the government or state plays a strong role in the economy
and may own stakes in certain businesses.
a.
Totalitarianism
b.
Democracy
c.
Communism
d.
Capitalism
e.
Socialism
Enter the appropriate word(s) to complete the statement.
46. Caveat venditor, or “______ beware,” involves placing the burden of product safety on manufacturers rather
than on consumers.
47. A political risk that only affects a certain industry or set of firms in a given country is called a ______ risk.
48. _______ is an economic ideology where by the government owns and controls all major factors of
production, and is philosophically an economically classless society.
49. Antitrust laws are designed to promote "fair ______" among businesses.
50. A situation where there is only a single seller of a product in an industry and there are very high barriers to
enter this industry is called a(n) _______.
51. A(n) _______ is the exclusive legal right that authors, playwrights, publishers, artists, composers,
performers, photographers, and other creators have to publish and disseminate their work as they see fit.
52. A(n) ________ is a distinctive phrase, name, word, picture, symbol or design, or combination of these, that
identifies a given business’ service or product, and is owned by said business.
53. ________ ; Greek for “rule by the people”; is a form of government in which all citizens have the right to
vote.
54. Countries with little or no tax ______ are known as tax haven countries.
55. The practice of companies acting in a manner which secretly thwarts competition amongst themselves is
known as _______.
Scenario – The Rochester Corporation
The Rochester Corporation is a multinational import-export firm with headquarters in the New York, USA. It
currently has thirteen offices located on foreign soil and plans to open seven more by the end of the
year. Rochester is quite proud of the fact that it reached over four billion dollars in revenue last year. The
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officers of the corporation are expecting to net over six billion per year with the projected expansion.
The Rochester Corporation considers it is a veteran when it comes to dealing with foreign governments and
nations. The company maintains strict guidelines for employees and will only hire those who have expatriate
experience of at least three years. The owners of Rochester attribute the company’s continued success to the
experience and knowledge of its employees.
56. In dealing with such a varied number of customers from virtually all major points in the world, the
Rochester Corporation is subjected to many risks. Which one of the following would not be considered an
economic risk Rochester potentially faces in its global dealings?
a.
Lack of consumer interest in the company's products
b.
The devaluation of foreign currency
c.
Confiscation of a company shipping vessel by pirates
d.
Currency conversion restrictions
e.
Potential for hyper-inflation to occur
Scenario – Britton Manufacturing
Brittany and Brandi Britton recently took over the family business, Britton Manufacturing, after their father and
company founder retired. The company manufactures the finest of bed linens and has grown to be recognized
as sixth in the industry for sales. Britton Manufacturing’s products have been produced and sold strictly within
the continental United States until this point in time. Now, the new owners desire to change things and plan to
begin exporting the company’s products to England, France, Norway, Greece, Egypt, China, and Germany.
Both Brittany and Brandi have graduated college with degrees in business and are looking forward to putting
their educations to good use in growing the company. They realize there is much to learn and are looking
forward to the challenges facing their international endeavor. They have projected an increase in sales by 15
million dollars in the first year as well as employment opportunities for an additional 500 workers in the U.S.
57. One of the international markets in which Britton Manufacturing plans to sell its products is China. All but
which one of the following identifies a significant challenge facing the company in this international
marketplace?
a.
The product laws of China are very similar to those found within the United
States.
b.
China is considered a communist country in which the government owns or
controls most of the factors of production.
c.
There is the possibility of the Chinese government confiscating the assets (the
products) of Britton Manufacturing.
d.
For the most part, the government of China continues to maintain control of the
unions within China.
e.
The market of China provides enormous opportunity for foreign companies
because it has been emerging as one of the most economically powerful nations in
the world in recent years.
58. Britton Manufacturing faces many laws and regulations that will impact the company while it conducts
business on foreign soil. Which one of the following is least likely to be of concern to Britton in the
international marketplace?
a.
Contract Law
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b.
U. S. Labor Laws
c.
Tax Law
d.
Product Safety Laws
e.
Dispute Settlement Law
Scenario – The Rochester Corporation
The Rochester Corporation is a multinational import-export firm with headquarters in the New York, USA. It
currently has thirteen offices located on foreign soil and plans to open seven more by the end of the
year. Rochester is quite proud of the fact that it reached over four billion dollars in revenue last year. The
officers of the corporation are expecting to net over six billion per year with the projected expansion.
The Rochester Corporation considers it is a veteran when it comes to dealing with foreign governments and
nations. The company maintains strict guidelines for employees and will only hire those who have expatriate
experience of at least three years. The owners of Rochester attribute the company’s continued success to the
experience and knowledge of its employees.
59. The Rochester Corporation has three products that were created by its employees. These products have
received patents from both the United States and twenty foreign nations. All three products are currently
exported to all of the company’s customers. Which one of the following does not reflect guidelines or rules
governing these patents?
a.
The inventor has exclusive rights to the product for a certain period of time
b.
Patent rights remain enforceable for 5-20 years depending upon the invention and
the country involved
c.
Patents have an expiration date set some time in the future depending on the
invention
d.
Modifications to the product by others are allowed after one year and with
government consent
e.
Patents offer inventors limited legal monopoly rights
60. If the Rochester Corporation experienced unresolved legal problems with one of its customers located in a
foreign country, all of the following except which one would be a potential way to remedy the problem?
a.
Engage in arbitration
b.
Have the court system use dispute settlement law to reach a resolution to the
problem
c.
Use the services of a mediator or an arbitrator
d.
Bring about litigation in the reigning court of law
e.
Obtain an executive order from the U.S. Attorney General’s office
61. Entering foreign marketplaces poses many challenges to companies like Britton Manufacturing. Which one
of the following would Britton Manufacturing least expect to be a challenge in its international business
expansion?
a.
The potential for the company’s executives to be kidnapped and held for ransom
while on foreign soil
b.
The constant fluctuation of foreign currencies in relation to the U.S. dollar
c.
The economic downturn in the United States resulting in many experienced
workers being unemployed or underemployed
d.
The instability and volatility of some foreign governments around the world
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e.
The potential for terrorist activity within certain foreign nations
62. Describe how patents, trademarks, and copyrights help protect intellectual properties in today's global
business environment. Give specific examples.
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Answer Key
1. True
2. True
3. False
4. True
5. True
6. True
7. True
8. True
9. False
10. False
11. False
12. False
13. True
14. False
15. False
16. c
17. c
18. e
19. a
20. b
21. c
22. b
23. a
24. e
25. d
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26. b
27. d
28. a
29. a
30. e
31. b
32. b
33. d
34. a
35. b
36. a
37. b
38. a
39. b
40. c
41. a
42. a
43. a
44. e
45. e
46. seller
47. micropolitical
48. Communism
49. competition
50. monopoly
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51. copyright
52. trademark
53. Democracy
54. transparency
55. collusion
56. c
57. a
58. b
59. d
60. e
61. c
62. Student answers will vary.
63. Student answers will vary.
64. Student answers will vary.
65. Student answers will vary.
66. Student answers will vary.
