The Legal Environment of Business, 8e (Kubasek)
Chapter 8 The International Legal Environment of Business
1) The five major families of law include all but which of the following?
A) common
B) Romano-Germanic
C) Islamic
D) Asian-Pacific
2) Countries that follow ________ law organize their legal systems around legal codes rather
than around cases, regulations, and precedents.
A) Romano-Germanic
B) common
C) civil
D) criminal
3) ________ law is derived from the Sastras.
A) Common
B) Romano-Germanic
C) Islamic
D) Hindu
4) ________ law is based on the teachings of Karl Marx.
A) Common
B) Romano-Germanic
C) Civil
D) Socialist
5) ________ law is derived from the Shari’a.
A) Common
B) Civil
C) Islamic
D) Hindu
6) Mediterranean and Latin American cultures base their group affiliation on ________.
A) age
B) gender
C) family
D) profession
7) Which of the following is true of the cultural dimensions in different countries?
A) Gender- and family-based affiliations are important in Saudi Arabia, where a strict
interpretation of Islam prevents women from playing a major role in business.
B) The hourly wage is higher in the United States than it is in Germany, meaning that the
workforce is able to acquire more consumer goods in Germany.
C) The Iranian government supports the selling of satellite communications in Iran, even though
they present decadent Western values.
D) Spanish is the national language of Brazil, but is not widely spoken in the rest of Latin
America.
8) When they venture into foreign territory, business managers have to be guided by ________.
A) the national legal system of their own country, that of the host country, and international law
B) the national legal system of their own country and that of the host country
C) the national legal system of the host country only
D) international law only
9) ________ law is one of the five major families of law.
A) Capitalist
B) Socialist
C) Criminal
D) Sectarian
10) Countries that follow ________ law organize their legal systems around legal codes rather
than around cases, regulations, and precedents.
A) Hindu
B) socialist
C) common
D) Romano-Germanic civil
11) Which of the following statements is true of civil law systems?
A) They make decisions that rely heavily on case precedents.
B) They have a superior public law.
C) They tend to put great emphasis on private law.
D) They are organized around cases and regulations.
12) Which of the following statements is true about the relationship between civil law systems
and common law systems?
A) They are polar opposites which have not yet been reconciled by legal scholars.
B) They are most evident in Islamic nations.
C) They are tending to merge, as judges in civil law countries take greater note of case law in
their decisions.
D) Hindu law makes use of common law, but it chooses to ignore cases that would be considered
precedents under a civil-law system.
13) One of the major goals of the Soviet legal system was to ________.
A) govern relationships between individuals and corporations
B) regulate family matters and property succession
C) promote private ownership of property
D) encourage collectivization of the economy
14) Which of the following statements is true of a socialist law system?
A) It is designed to preserve the authority of the state over agricultural land.
B) It is designed to enable private ownership of all means of production.
C) It prohibits earning interest on money.
D) It tends to put great emphasis on private law.
15) Companies doing business in ________ follow common law.
A) Germany
B) France
C) England
D) Sweden
16) Socialist law systems are based on the ________.
A) teachings of Karl Marx
B) Romano-Germanic civil law
C) rules governing personal and religious behavior set out in texts known as Sastras
D) British common-law tradition
17) Which of the following statements is true about Hindu law?
A) It is based on writings of the Positivist School that date from the Thirteenth Century.
B) It is based on a belief in the collectivization of agricultural property.
C) It is linked to the revelation of the Vedas, a collection of religious songs and prayers.
D) It is essentially nonreligious and impersonal, basing its fundamental teaching on objective
reasoning and logic.
18) The major goals of the legal system of a certain country are to encourage collectivization of
the economy and to maintain national security. In addition, most property belongs to the state,
particularly industrial and agricultural property. This country has a(n) ________ law system.
A) common
B) Hindu
C) socialist
D) Islamic
19) Hindu law is primarily concerned with ________.
A) maintaining national security
B) preserving the authority of the state over agricultural land
C) family matters and property succession
D) ensuring that citizens obey the Shari’a
20) The law that governs the relationships between nation-states is known as ________ law.
A) private international
B) public international
C) international business
D) international trade
21) Culture may be defined as learned norms of a society that are based on values, beliefs, and
attitudes.
22) In the Marxist form of government, economic decisions are centralized.
23) A market economy limits the price that can be charged for goods inside the country.
24) Gender- and family-based affiliations are examples of acquired group membership.
25) In many countries, Islamic law, as encoded in the Shari’a, exists alongside the secular law.
26) Countries that follow the Romano-Germanic civil law organize their legal systems around
cases, regulations, and precedents rather than around legal codes.
27) The primary concerns of Hindu law are national security and collectivization of the
economy.
28) One source of international law can be found in decisions of national and regional courts.
29) The U.S. Constitution prohibits a state from entering into “any Treaty, Alliance or
Confederation.”
30) Discuss the five major “families” of law.
31) Discuss the difference between public and private international law, and list the sources of
international law.
32) Discuss the cultural dimensions of the international environment of business.
33) Compare and contrast the common law system and the civil law system.
34) The theory of ________ refers to a theory of trade relationship that encourages nations to
concentrate on exporting the goods they can produce most efficiently.
A) contributory advantage
B) new trade
C) absolute advantage
D) traded intermediate goods
35) The absolute advantage theory of international trade states that ________.
A) companies should franchise their trademarks to avoid a nation-state’s restrictions on foreign
direct investment
B) all licensing agreements should be subject to restrictions of the host country
C) a country would contribute to global efficiency if it produced specialized products more
efficiently than others did
D) an individual nation should concentrate on exporting the goods that it can produce most
efficiently
36) ________ is generally considered to be the least risky means of doing international business.
A) Licensing
B) Trade
C) Franchising
D) Direct investment
37) ________ refers to contractual agreement by which a company makes its trade secrets,
trademarks, patents, or copyrights available to a foreign individual or company in return either
for royalties or for other compensation based on the volume of goods sold or a lump sum.
A) International licensing
B) Expropriation
C) International franchising
D) Foreign direct investment
38) Which of the following statements is true of foreign distributors?
A) They have little involvement with buyers or sellers outside the parent country.
B) They purchase imported goods at a discount and resell them in the foreign or host country.
C) They maintain a principal-agent relationship with the exporter.
D) They do not take title to the goods being exported.
39) Which of the following scenarios best illustrates a franchise?
A) The owner of a coffee plantation agrees to export coffee beans to stores in Italy.
B) An automobile manufacturer imports materials required for car manufacture from a
distributor in Canada.
C) An online merchandising company builds a warehouse in Great Britain.
D) A fast food restaurant permits a business owner in Belgium to operate a restaurant that uses
its trademark.
40) Which of the following statements is true of foreign direct investment?
A) The multinational either creates a wholly or partially owned and controlled foreign subsidiary
in the host country.
B) It involves permitting a licensee of a trademark to market the licensor’s goods or services in a
particular nation.
C) It is less risky than international trade and international franchising and licensing.
D) The capital invested is not subject to government restrictions and domestic law of the host
country.
41) Which of the following is not a reason for a multinational corporation to create a foreign
subsidiary?
A) expand its foreign market(s)
B) acquire foreign resources
C) improve production efficiency
D) avoid expropriation
42) Which of the following is not a reason for a multinational corporation to create a foreign
subsidiary?
A) acquire knowledge
B) be closer to its customers
C) be closer to its competitors
D) minimize foreign direct investment risk
43) A large automobile manufacturer wants to expand its market for mid-size cars to a country
with a large population and sizeable working class. In addition, this country is also known to be a
source for cheap labor. This is something that could help the auto company significantly improve
its production efficiency. Which of the following methods of engaging in international business
will help the company best achieve these goals?
A) international licensing
B) joint venture
C) international franchising
D) foreign subsidiary
44) Which of the following is a form of foreign direct investment?
A) An investor enters into a licensing agreement with a foreign government.
B) A company purchases a warehouse outside the sovereign borders of its parent country.
C) A company enters into an international franchise agreement.
D) A company enters into a joint venture with a government agency in the host country.
45) The theory of comparative advantage states that an individual nation should concentrate on
exporting the goods that it can produce most efficiently.
46) International franchising can reduce the likelihood of political instability being a threat.
47) Joint ventures are used in host countries with fewer restrictions on foreign investment.
48) How are the licensing and franchising methods of engaging in international trade different
from one another?
49) A ________ obligates the host government to extend fair and nondiscriminatory treatment to
investors from the other country.
A) BIT
B) REIT
C) CF
D) CIF
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50) Expropriation ________.
A) is granting permits to a licensee of a trademark to market the licensor’s goods or services in a
particular nation
B) is the taking of private property by a host-country government for either political or economic
reasons
C) is a contractual agreement by which a company makes its trade secrets, trademarks, patents,
or copyrights available to a foreign individual or company
D) is the ownership and use of private property for profit, which is in violation of socialist law
51) Which of the following terms refers to the taking of private property by a host-country
government for either political or economic reasons?
A) licensing
B) franchising
C) expropriation
D) appropriation
52) ________ are negotiated between two governments and obligate the host government to
extend fair and nondiscriminatory treatment to investors from the other country.
A) Joint ventures
B) Bilateral investment treaties
C) Act-of-state doctrines
D) Sovereign immunity doctrines