Chapter 02 National Differences in Political Economy
True / False Questions
1.
The two dimensions, according to which the political systems can be
assessed, collectivism-individualism and democratic-totalitarian are
independent of each other.
FALSE
Political systems can be assessed according to two dimensions. The first is
the degree to which they emphasize collectivism as opposed to
individualism. The second is the degree to which they are democratic or
totalitarian. These dimensions are interrelated.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
2.
It is possible to have a democratic political system that emphasizes a mix of
collectivism and individualism.
TRUE
Systems that emphasize collectivism tend toward totalitarian, whereas
those that place a high value on individualism tend to be democratic.
However, a large gray area exists in the middle. It is possible to have
democratic societies that emphasize a mix of collectivism and individualism.
Similarly, it is possible to have totalitarian societies that are not collectivist.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
3.
When collectivism is emphasized, an individual’s right to do something may
be restricted on the grounds that it runs counter to “the good of society.”
TRUE
When collectivism is emphasized, the needs of society as a whole are
generally viewed as being more important than individual freedoms. In such
circumstances, an individual’s right to do something may be restricted on
the grounds that it runs counter to “the good of society” or to “the common
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
4.
Plato, to whom the advocacy of collectivism is traced back, did not equate
collectivism with equality.
TRUE
Advocacy of collectivism can be traced to the ancient Greek philosopher
Plato. Plato did not equate collectivism with equality; he believed that
society should be stratified into classes, with those best suited to rule
(which for Plato, naturally, were philosophers and soldiers) administering
society for the benefit of all.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
5.
The central message of collectivism is that individual economic and political
freedoms are the ground rules on which a society should be based.
FALSE
Collectivism refers to a political system that stresses the primacy of
collective goals over individual goals. When collectivism is emphasized, the
needs of society as a whole are generally viewed as being more important
than individual freedoms.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
6.
The communists believed that socialism could be achieved by democratic
means, and turned their backs on violent revolution and dictatorship.
FALSE
The communists believed that socialism could be achieved only through
violent revolution and totalitarian dictatorship, whereas the social
democrats committed themselves to achieving socialism by democratic
means, turning their backs on violent revolution and dictatorship.
AACSB: Analytic
7.
The social democrats believed that socialism could be achieved only
through violent revolution and totalitarian dictatorship.
FALSE
The communists believed that socialism could be achieved only through
violent revolution and totalitarian dictatorship, whereas the social
democrats committed themselves to achieving socialism by democratic
means, turning their backs on violent revolution and dictatorship.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
8.
Modern socialists trace their intellectual roots to Karl Marx (1818-83),
although socialist thought clearly predates Marx.
TRUE
Modern socialists trace their intellectual roots to Karl Marx (1818-83),
although socialist thought clearly predates Marx (elements of it can be
traced to Plato).
AACSB: Analytic
Blooms: Remember
9.
In an individualist society, the welfare of society is best served by letting
people pursue their own economic self-interest.
TRUE
Individualism refers to a philosophy that an individual should have freedom
in his or her economic and political pursuits. In contrast to collectivism,
individualism stresses that the interests of the individual should take
precedence over the interests of the state.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
10.
Aristotle argued that individual diversity and private ownership are
undesirable.
FALSE
Aristotle argued that individual diversity and private ownership are
desirable.
According to Aristotle, communal property receives little care, whereas
property that is owned by an individual will receive the greatest care and
therefore be most productive.
Topic: Political Systems
11.
In practical terms, individualism translates into an advocacy for democratic
political systems and market economics.
TRUE
In practical terms, individualism translates into an advocacy for democratic
political systems and market economics, which in general creates a more
favorable environment for international businesses to operate in.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
12.
Most modern democratic states practice representative democracy.
TRUE
In complex, advanced societies with populations in the tens or hundreds of
millions the pure form of democracy is impractical. Most modern democratic
states practice representative democracy.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
13.
In a totalitarian country, there are safeguards to protect an individual’s right
to freedom of expression, opinion, and organization.
FALSE
In a totalitarian country, all the constitutional guarantees on which
representative democracies are built—an individual’s right to freedom of
expression and organization, a free media, and regular elections—are
denied to the citizens.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-01 Understand how the political systems of countries differ.
Topic: Political Systems
14.
It is possible to have a totalitarian state that is hostile to collectivism and
where some degree of individualism is encouraged.
TRUE
Right-wing totalitarianism generally permits some individual economic
freedom but restricts individual political freedom, frequently on the grounds
that it would lead to the rise of communism. A common feature of many
right-wing dictatorships is an overt hostility to socialist or communist ideas.
AACSB: Analytic
15.
In a market economy, if demand for a product exceeds supply, prices will
rise, signaling to producers to produce more.
TRUE
In a market economy, if demand for a product exceeds supply, prices will
rise, signaling producers to produce more. If supply exceeds demand, prices
will fall, signaling producers to produce less. In this system consumers are
sovereign.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
16.
The number of command economies has fallen dramatically since the
demise of communism in the late 1980s.
TRUE
Historically, command economies were found in communist countries where
collectivist goals were given priority over individual goals. Since the demise
of communism in the late 1980s, the number of command economies has
fallen dramatically.
Topic: Economic Systems
17.
The objective of the government in a command economy is to encourage
free and fair competition between private producers.
FALSE
The objective of a command economy is for government to allocate
resources for “the good of society.” In addition, in a pure command
economy, all businesses are state owned.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
18.
In a command economy, enterprises have little incentive to control costs
and be efficient, because they cannot go out of business.
TRUE
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.
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
19.
In mixed economies, governments also tend to take into state ownership
troubled firms whose continued operation is thought to be vital to national
interests.
TRUE
In a mixed economy, certain sectors of the economy are left to private
ownership and free market mechanisms while other sectors have significant
state ownership and government planning. In mixed economies,
governments also tend to take into state ownership troubled firms whose
continued operation is thought to be vital to national interests.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-02 Recognize how the economic systems of countries differ.
Topic: Economic Systems
20.
A nation’s legal system is usually of very little interest to international
business managers, because international businesses are headquartered in
different countries.
FALSE
The legal system of a country refers to the rules, or laws, that regulate
behavior along with the processes by which the laws are enforced and
through which redress for grievances is obtained. The legal system of a
country is of immense importance to international business.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
21.
When law courts interpret common law, they do so with regard to tradition,
precedent, and custom.
TRUE
Common law is based on tradition, precedent, and custom. Tradition refers
to a country’s legal history, precedent to cases that have come before the
courts in the past, and custom to the ways in which laws are applied in
specific situations. When law courts interpret common law, they do so with
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
22.
Judges under a civil law system have more flexibility than those under a
common law system.
FALSE
A civil law system is based on a detailed set of laws organized into codes.
Judges under a civil law system have less flexibility than those under a
common law system.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
23.
Judges in a common law system have the power to interpret the law so that
it applies to the unique circumstances of an individual case.
TRUE
Common law is based on tradition, precedent, and custom. Judges in a
common law system have the power to interpret the law so that it applies to
the unique circumstances of an individual case.
AACSB: Analytic
Blooms: Understand
Topic: Legal Systems
24.
Common law is primarily a moral rather than a commercial law and is
intended to govern all aspects of life.
FALSE
The common law system evolved in England over hundreds of years.
Common law is based on tradition, precedent, and custom.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
25.
A theocratic law system is one in which the law is based on religious
teachings.
TRUE
A theocratic law system is one in which the law is based on religious
teachings.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
26.
The parties to an agreement normally resort to contract law when one party
feels the other has violated either the letter or the spirit of an agreement.
TRUE
Contract law is the body of law that governs contract enforcement. The
parties to an agreement normally resort to contract law when one party
feels the other has violated either the letter or the spirit of an agreement.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
27.
Contracts under a civil law system tend to be very detailed with all
contingencies spelled out.
FALSE
Because common law tends to be relatively ill specified, contracts drafted
under a common law framework tend to be very detailed with all
contingencies spelled out. In civil law systems, however, contracts tend to
be much shorter and less specific because many of the issues are already
covered in a civil code.
28.
Many of the world’s larger trading nations, including Japan and the United
Kingdom, have not ratified the United Nations Convention on Contracts for
the International Sale of Goods (CIGS).
TRUE
One problem with the CIGS, however, is that fewer than 70 nations have
ratified the convention (the CIGS went into effect in 1988). Many of the
world’s larger trading nations, including Japan and the United Kingdom,
have not ratified the CIGS.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
29.
Property rights refer to the legal rights over the use to which a resource is
put and over the use made of any income that may be derived from that
resource.
TRUE
Property rights refer to the legal rights over the use to which a resource is
put and over the use made of any income that may be derived from that
resource.
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
30.
To facilitate international business, property rights are defined in a
consistent way across countries.
FALSE
Countries differ in the extent to which their legal systems define and protect
property rights.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
31.
Property rights can be violated in two ways—through private action and
through public action.
TRUE
Property rights can be violated in two ways—through private action and
through public action.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
32.
The Foreign Corrupt Practices Act does not allow for grease payments.
FALSE
Both the U.S. law and OECD convention include language that allows for
exceptions known as facilitating or expediting payments (also called grease
payments or speed money ), the purpose of which is to expedite or to
secure the performance of a routine governmental action.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
33.
In the 1970s, the United States passed the Foreign Corrupt Practices Act
which requires all publicly traded companies, whether or not they are
involved in international trade, to keep detailed records that would reveal
whether a violation of the act has occurred.
TRUE
The Foreign Corrupt Practices Act requires all publicly traded companies
(whether or not they are involved in international trade) to keep detailed
records that would reveal whether a violation of the act has occurred.
AACSB: Analytic
34.
Patents, copyrights, and trademarks establish ownership rights over
intellectual property.
TRUE
Patents, copyrights, and trademarks establish ownership rights over
intellectual property.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
35.
Patents discourage companies from committing themselves to extensive
basic research.
FALSE
The philosophy behind intellectual property laws is to reward the originator
of a new invention, book, musical record, and the like, for his or her idea
and effort. Without the guarantees provided by patents, companies would
be unlikely to commit themselves to extensive basic research.
AACSB: Analytic
Blooms: Remember
36.
The Trade Related Aspects of Intellectual Property Rights, attempts to
reduce intellectual property protections to enhance trade.
FALSE
Under the new agreement, known as the Trade Related Aspects of
Intellectual Property Rights (or TRIPS), as of 1995 a council of the World
Trade Organization is overseeing enforcement of much stricter intellectual
property regulations. These regulations oblige WTO members to grant and
enforce patents lasting at least 20 years and copyrights lasting 50 years.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 02-03 Understand how the legal systems of countries differ.
Topic: Legal Systems
37.
Product liability sets certain safety standards to which a product must
adhere.
FALSE
Product safety laws set certain safety standards to which a product must
adhere.
Product liability involves holding a firm and its officers responsible when a
product causes injury, death, or damage.