79.
Discuss collectivism. What ideals does the philosophy support? Where did
the philosophy start? How does collectivism exist in the modern world?
A collectivist political system is one that stresses the primacy of collective
goals over individual goals. In that sense, the needs of the society as a
whole are viewed as being more important than individual freedoms.
Collectivism can trace its roots to the ancient Greek philosopher Plato who
suggested that individual rights be sacrificed for the good of the majority.
Today, collectivism is reflected in the socialist movement started by Karl
Marx who argued that the few benefit at the expense of the many in a
capitalist society where individual freedoms are not restricted. Marx
advocated state ownership of the basic means of production, distribution,
and exchange. Supporters of Marx’s ideals were divided into two camps in
the early 20th century: communists, who believed that socialism could only
be achieved through violent revolution and totalitarian dictatorship; and
80.
What are state-owned companies? Why do they usually perform poorly?
A state-owned company is a company that is owned by a nation’s
government. After World War II, many social democratic governments
nationalized private companies that were to be run for the public good
rather than private profit. Great Britain, for example, nationalized so many
companies that by the end of the 1970s, state-owned monopolies existed in
telecommunications, electricity, gas, coal, and several other industries.
However, because state-run companies such as the ones that existed in
Great Britain are protected from competition by their monopoly position and
guaranteed financial support, they become inefficient.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
81.
Discuss individualism. Explain the key positions of the philosophy, it roots,
and its role in the modern economy.
Individualism refers to a philosophy that an individual should have freedom
in his/her economic and political pursuits. Accordingly, the philosophy
stresses that the interests of the individual should take precedence over the
interests of the state. Individualism can be traced to the ancient Greek
philosopher Aristotle who argued that individual diversity and private
ownership are desirable. Aristotle’s philosophy was refined by David Hume,
Adam Smith, and John Stuart Mill in the 1700s and 1800s, and more
recently by Milton Friedman, Friedrich von Hayek, and James Buchanan.
Today, individualism translates into an advocacy for democratic political
systems and free market economies.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
82.
Compare and contrast a pure democracy and a representative democracy.
Which type of democracy is more common today? Why?
The pure form of democracy is based on a belief that citizens should be
directly involved in decision making. In contrast, in a representative
democracy, citizens periodically elect individuals to represent them. The
elected individuals form a government and make decisions on behalf of the
electorate. Because a pure democracy is impractical in advanced societies
with tens or hundreds of millions of people, representative democracies are
far more common in today’s world.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
83.
How do countries with representative democracies ensure that their elected
officials are held responsible for their actions?
To guarantee that elected representatives are being held accountable for
their actions by the electorate, an ideal representative democracy
incorporates safeguards that are enshrined in constitutional law. These
safeguards include an individual’s right to freedom of expression, opinion,
and organization; a free media; regular elections in which all eligible citizens
are allowed to vote; universal adult suffrage; limited terms for elected
representatives; a fair court system that is separate for the political system;
a nonpolitical state bureaucracy; a nonpolitical police force and armed
service; and relatively free access to state information.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
84.
Compare and contrast the four forms of totalitarianism.
In a totalitarian country, an individual’s right to freedom of expression and
organization, a free media, and regular elections are denied to the citizens.
There are four forms of totalitarianism. Communist totalitarianism was until
recently the most widespread form of totalitarianism. This form of
totalitarianism advocates that socialism can only be achieved through
totalitarian dictatorship. Theocratic totalitarianism is found in states where
political power is monopolized by a party, group, or individual that governs
according to religious principles. Tribal totalitarianism occurs when a
political party that represents the interests of a particular tribe monopolizes
power. Right-wing totalitarianism permits some individual economic
freedoms but restricts individual political freedom.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
85.
Identify the three types of economic systems. How do these three types of
economic systems differ from each other? How are they the same?
In a pure market economy, all productive activities are privately owned.
Production is determined by supply and demand, and signaled to producers
through the price system. The role of the government in a pure market
economy is to encourage vigorous free and fair competition between private
producers. In a command economy, the goods and services that a country
produces, the quantity in which they are produced, and the prices at which
they are sold are all planned by the government. The government’s role is to
allocate resources for the good of the society. In addition, all businesses are
state owned. A mixed economy is a combination of the other economic
systems in which certain sectors of the economy are left to private
ownership and free market mechanisms, while other sectors have
significant state ownership and government planning.
AACSB: Analytic
Blooms: Remember
86.
Discuss why there is inefficiency in a monopoly situation. What is the role of
the government in such a situation?
In a monopoly situation, a firm has no competitors, and therefore it has no
incentive to search for ways to lower production costs. Rather, cost
increases are simply passed on to consumers in the form of higher prices.
The net result is that the monopolist is likely to become increasingly
inefficient, producing high-priced, low-quality goods. Given the dangers
inherent in monopoly, the role of government in a market economy is to
encourage vigorous free and fair competition between private producers.
Governments do this by outlawing restrictive business practices designed to
monopolize a market (antitrust laws serve this function in the United
States).
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
87.
Discuss the effects of private ownership of production in a market
economy.
Private ownership encourages vigorous competition and economic
efficiency. Private ownership ensures that entrepreneurs have a right to the
profits generated by their own efforts. This gives entrepreneurs an incentive
to search for better ways of serving consumer needs. That may be through
introducing new products, by developing more efficient production
processes, by pursuing better marketing and after-sale service, or simply
through managing their businesses more efficiently than their competitors.
In turn, the constant improvement in product and process that results from
such an incentive has been argued to have a major positive impact on
economic growth and development.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
88.
Why do command economies tend to stagnate?
The objective of a command economy is to mobilize economic resources for
the public good, however the opposite usually occurs. In a command
economy, state-owned enterprises have little incentive to control costs and
be efficient, because they cannot go out of business. Also, the abolition of
private ownership means there is no incentive for individuals to look for
better ways to serve consumer needs; hence, dynamism and innovation are
absent from command economies. Instead of growing and becoming more
prosperous, such economies tend to stagnate.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
89.
What is a country’s legal system? Why is it important to international
businesses?
The legal system of a country refers to the rules, or laws, that regulate
behavior along with the processes by which laws are enforced through
which redress for grievances are obtained. It is critical that international
companies understand a country’s legal system because the legal system
regulates business practice, defines the manner in which business
transactions are to be executed, and sets down the rights and obligations of
those involved in business transactions.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
90.
Explain the differences between common law and civil law systems by the
approach of each to contract law.
Contracts drafted under a common law framework tend to be very detailed
with all contingencies spelled out. In contrast, contracts in a civil law
system tend to be much shorter and less specific because many of the
issues typically covered in a common law contract are already covered in
civil law.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
91.
What is the United Nations Convention on Contracts for the International
Sale of Goods (CIGS)?
When contract disputes arise in international trade, there is always the
question of which country’s laws to apply. To resolve this issue, a number of
countries, including the
United States, have ratified the United Nations Convention on Contracts for
the International Sale of Goods (CIGS). The CIGS establishes a uniform set
of rules governing certain aspects of the making and performance of
everyday commercial contracts between sellers and buyers who have their
places of business in different nations. By adopting the CIGS, a nation
signals to other adopters that it will treat the convention’s rules as part of
its law. The CIGS applies automatically to all contracts for the sale of goods
between different firms based in countries that have ratified the convention,
unless the parties to the contract explicitly opt out.
AACSB: Analytic
Blooms: Remember
92.
What is private action?
Private action refers to theft, piracy, blackmail, and the like by private
individuals or groups. Although theft occurs in all countries, a weak legal
system allows for a much higher level of criminal action in some than in
others. For example, in Russia in the chaotic period following the collapse of
communism, an outdated legal system, coupled with a weak police force
and judicial system, offered both domestic and foreign businesses scant
protection from blackmail by the “Russian Mafia.” Successful business
owners in Russia often had to pay “protection money” to the Mafia or face
violent retribution, including bombings and assassinations.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
93.
Discuss the ways in which public action to violate property rights can
occur.
Public action to violate property rights occurs when public officials, such as
politicians and government bureaucrats, extort income, resources, or the
property itself from property holders. This can be done through legal
mechanisms such as levying excessive taxation, requiring expensive
licenses or permits from property holders, taking assets into state
ownership without compensating the owners, or redistributing assets
without compensating the prior owners. It can also be done through illegal
means, or corruption, by demanding bribes from businesses in return for the
rights to operate in a country, industry, or location.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
94.
Discuss the Foreign Corrupt Practices Act.
The Foreign Corrupt Practices Act was passed during the 1970s by the
United States. The Law makes it illegal for American companies to bribe a
foreign government official in order to obtain or maintain business over
which that foreign official has authority, and requires all publicly trade
companies to keep detailed records that would allow determining whether a
violation of the act has occurred.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
95.
Discuss the different ways to protect intellectual property.
Ownership rights over intellectual property are established through patents,
copyrights, and trademarks. A patent grants the inventor of a new product
or process exclusive rights for a defined period to the manufacture, use, or
sale of that invention. Copyrights are the exclusive legal rights of authors,
composers, playwrights, artists, and publishers to publish and disperse their
work as they see fit. Trademarks are designs and names by which
merchants or manufacturers designate and differentiate their products.
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
96.
What is product liability?
Product liability involves holding a firm and its officers responsible when a
product causes injury, death, or damage. Product liability can be much
greater if a product does not conform to required safety standards. Both
civil and criminal product liability laws exist. Civil laws call for payment and
monetary damages. Criminal liability laws result in fines or imprisonment.
Both civil and criminal liability laws are probably more extensive in the
United States than in any other country, although many other Western
nations also have comprehensive liability laws. Liability laws are typically
least extensive in less developed nations.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
97.
What are the factors that contribute to the attractiveness of a country as a
market or investment site?
The political, economic, and legal environments of a country clearly
influence the attractiveness of that country as a market or investment site.
The benefits, costs, and risks associated with doing business in a country
are a function of that country’s political, economic, and legal systems. The
overall attractiveness of a country as a market or investment site depends
on balancing the likely long-term benefits of doing business in that country
against the likely costs and risks.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-04 Explain the implications for management practice of national differences in political economy.
Topic: Implications For Managers